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STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March 31, 2024OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________to _________Commission file number 000-383128x8, Inc.(Exact name of Registrant as Specified in its Charter)Delaware77-0142404(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)675 Creekside Way Campbell, CA 95008 (Address of Principal Executive Offices including Zip Code)(408) 727-1885 (Registrant's Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading SymbolName of each exchange on which registeredCOMMON STOCK, PAR VALUE $.001 PER SHAREEGHTNasdaq Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ☐ No  ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ☐ No  ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒ No  ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒ No  ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer☐Accelerated filer ☒Non-accelerated filer ☐Smaller reporting company  ☒Emerging growth company  ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).  ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ☐ No  ☒The aggregate market value of voting stock held by non-affiliates of the Registrant on September 30, 2023, based on the closing price of $2.52 for shares of the Registrant’s common stock as reported by the Nasdaq Global Select Market, was approximately $181.1 million. Shares of common stock held by each executive officer, director, and their affiliated holders have been excluded in that such persons may be deemed to be affiliates. The determination of affiliate status for this purpose is not necessarily a conclusive determination for any other purpose.The number of shares of the Registrant's common stock outstanding as of May 8, 2024 was 125,376,171.DOCUMENTS INCORPORATED BY REFERENCEItems 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the Proxy Statement to be filed within 120 days of March 31, 2024 for the 2024 Annual Meeting of Stockholders.8X8, INC.INDEX TO ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED MARCH 31, 2024 Part I.PageForward-Looking Statements and Risk Factors3Item 1.Business4Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments30Item 1C.Cybersecurity30Item 2.Properties31Item 3.Legal Proceedings31Item 4.Mine Safety Disclosures31Part II.Item 5.Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities32Item 6.[Reserved]33Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations34Item 7A.Quantitative and Qualitative Disclosures About Market Risk43Item 8.Financial Statements and Supplementary Data44Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure75Item 9A.Controls and Procedures75Item 9B.Other Information75Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections75Part III.Item 10.Directors, Executive Officers and Corporate Governance76Item 11.Executive Compensation76Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters76Item 13.Certain Relationships and Related Transactions and Director Independence76Item 14.Principal Accountant Fees and Services76Part IV.Item 15.Exhibits and Financial Statement Schedules77Item 16.Form 10-K Summary80Signatures812PART IForward-Looking Statements and Risk FactorsStatements contained in this annual report on Form 10-K, or this "Annual Report", regarding our expectations, beliefs, estimates, intentions or strategies are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding: industry trends; our number of customers; average annual service revenue per customer; cost of service revenue; growth in service revenue; research and development expenses; costs related to our continued growth initiatives; hiring of employees; sales and marketing expenses; unit costs and cost reductions; gross profit margin; general and administrative expenses in future periods; liquidity; indebtedness; capital; cash, cash equivalents and investment balances; anticipated cash flows; annualized recurring and usage revenue ("ARR"); operating efficiency; and the ongoing impact of the COVID-19 pandemic. You should not place undue reliance on these forward-looking statements. Actual results and trends may differ materially from historical results and those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to:•the impact of economic downturns on us and our customers;•the impact of cost increases and general inflationary pressures, as well as supply chain shortages and disruptions, on our operating expenses;•risks related to our secured term loan facility due 2027 and convertible senior notes due 2028, including the impact of increased interest expense and timing of any future repayments or refinancing on our stock price; •customer cancellations and rate of customer churn;•ongoing volatility and conflict in the political and economic environment, including the impact of Russia’s invasion of Ukraine and conflicts in the Middle East, and any related macro-economic impacts;•customer acceptance and demand for our new and existing cloud communication and collaboration services and features, including voice, contact center, video, messaging, and communication application programming interfaces;•competitive market pressures, and any changes in the competitive dynamics of the markets in which we compete;•the quality and reliability of our services;•our ability to scale our business;•customer acquisition costs;•our reliance on a network of channel partners to provide substantial new customer demand;•timing and extent of improvements in operating results from increased spending in marketing, sales, and research and development;•the amount and timing of costs associated with recruiting, training, and integrating new employees and retaining existing employees;•our reliance on infrastructure of third-party network service providers;•risk of failure in our physical infrastructure;•risk of defects or bugs in our software;•risk of cybersecurity breaches;•our ability to maintain the compatibility of our software with third-party applications and mobile platforms;•continued compliance with industry standards and regulatory and privacy requirements, globally;•introduction and adoption of our cloud software solutions in markets outside of the United States;•risks that any reduction in spending may not achieve the desired result or may result in a reduction in revenue;•risks relating to the acquisition and integration of businesses we have acquired or may acquire in the future, including most recently, Fuze, Inc.;•risks related to the fluctuations in the value of the United States Dollar and other currencies that underlie our business transactions;•risks related to our substantial amount of indebtedness, which could have important consequences to our business;•potential future intellectual property infringement claims and other litigation that could adversely impact our business and operating results; and•the instability in the banking system in recent years, which could adversely impact our operations and operating results.The forward-looking statements may also be impacted by the additional risks faced by us as described in this Annual Report, including those set forth under the section entitled "Risk Factors." All forward-looking statements included in this Annual Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.Our fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in this Annual Report refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ended March 31, 2024). Unless the context requires otherwise, references to "we," "us," "our," "8x8," and the "Company" refer to 8x8, Inc. and its consolidated subsidiaries.All dollar amounts within this Annual Report are in thousands of United States Dollars ("Dollars") unless otherwise noted.3ITEM 1. BUSINESSOverview8x8 is a leading global provider of contact center as-a-service, or CCaaS, and unified communications as-a-service, or UCaaS, software, powered by our secure cloud-native communications platform. We also provide embeddable communications platform as-a-service, or CPaaS, allowing customers to seamlessly integrate video and messaging to deliver tailored omni-channel customer experiences that increase customer engagement, loyalty and retention. Together, these solutions comprise the 8x8 XCaaS platform.Our XCaaS platform has been deployed by a broad range of customers, ranging from small businesses to very large enterprises. At the end of fiscal 2024, more than 43% of our annualized recurring and usage revenue, or ARR (see the section entitled “Key Business Metrics” in Part II, Item 7 "MD&A" for how we define and use annualized recurring and usage revenue) was generated by customers deploying both contact center as-a-service and unified communications as-a-service solutions, compared to 40% from the end of fiscal 2023. We had more than 3.0 million paid licensed users at more than 57,000 customers worldwide at the end of the fiscal year.Since mid-fiscal 2023, we have focused a significant portion of our investment in innovation on enhancing our contact center as-a-service solution and expanding our product portfolio to address the requirements of small- and mid-sized enterprises, which we define as enterprise customers with 100 to 10,000 employees. These customers want fully integrated solutions that deliver business outcomes, rather than point products from multiple vendors that they must integrate themselves and that create data silos and analytics gaps.Our routes to market include indirect sales through a variety of channels, including value-added resellers, or VARs, system integrators and technology partners, as well as direct sales to new and existing customers. We have also invested in expanding our customer success organization to drive increased customer satisfaction and retention.Our StrategyWe believe there is a large market opportunity to provide solutions for small- and mid-sized enterprises that bridge the gaps in communications and customer experience that result from siloed communications and contact center environments. Our solutions are intentionally engineered to enable information technology, or IT, teams and customer experience leaders to improve customer satisfaction, increase efficiency and drive better business outcomes for our customers.We have prioritized investments in:•High Levels of Customer Satisfaction. Our customer success organization is dedicated to driving positive business outcomes through a lifetime engagement model, leading to consistently high customer satisfaction levels. Our approach is built on three foundational pillars: unified product experiences across all channels, rapid value realization via a modular approach and smooth onboarding, and proactive engagement strategies to foster long-term customer value. These initiatives have led to high customer satisfaction scores among enterprise customers and recognition for our leadership and support.•Continuous Innovation of our Advanced Cloud-Native XCaaS Platform. Utilizing a micro-services architecture, our software-as-a-service, or SaaS, platform ensures high availability and supports the rapid deployment of new features and functionalities, including artificial intelligence-based features and applications. Our innovation efforts are centered around key customer experience differentiators, including artificial intelligence-powered shared services, comprehensive capture and synchronization of customer interaction data, artificial intelligence-powered analytics, user experience/user interface, and enhanced contact center functionalities accessible to all customer-facing employees.•Enabling a Solution Approach to Artificial Intelligence. We implement artificial intelligence natively at the platform layer for shared services and integrate purpose-built applied artificial intelligence products from our technology partner ecosystem at the data layer and in our user interface for a native-like user experience. Our approach allows customers to implement best-of-breed solutions tailored to specific use cases without the burden of integrating products from multiple vendors.•Driving Multi-Product Adoption. Multi-product adoption significantly enhances customer revenue, satisfaction, and retention. As we broaden our product offerings through internal development and strategic technology partnerships, we are able to deliver complete solutions that deliver rapid time to value while reducing total cost of ownership. Our business development teams work with our customer success managers to identify and actively pursue cross-sell opportunities within our existing customer base.•Acquiring New Customers. There is a substantial opportunity to transition small and mid-sized enterprises from on-premise to our cloud-based communications and contact center solutions. We are refining our lead-generation tactics and market strategies across various channels, including direct sales, e-commerce, resellers, and strategic partners, to enhance solution awareness and grow our customer base.•Expanding our Technology Partner Ecosystem. We have developed a robust ecosystem of carefully curated technology, integration and reseller partners with solutions that complement our core platform. This ecosystem supports the integration of purpose-built applications that are tightly aligned with our platform, offering specific solutions for distinct use cases or industries. This strategy includes deep integration at the data layer and in the user interface to minimize integration challenges for customers and increase their agility to meet evolving business demands.4Our XCaaS PlatformOur XCaaS platform, built on a cutting-edge microservices architecture, utilizes our extensive global network of data centers, carrier partners, and cloud deployments to ensure high availability, scalability, and adherence to data sovereignty laws. Historically, our platform has scaled from basic communication services (local dial-tone services) to a full suite of cloud communications software including contact center, voice, team chat, video meetings, and artificial intelligence-driven analytics. Further, we provide an extensive library of application program interfaces, or APIs, and tools to integrate video, short messaging service, or SMS, messaging and other capabilities.Our platform enables a broad range of solutions that improve employee and customer experiences, including artificial intelligence-powered self-service, intelligent routing, secure payments, and workforce management, for customer-facing employees. With our platform’s comprehensive data layer, customer interaction data can be coordinated across our unified communications as-a-service, contact center as-a-service and communications platform as-a-service solutions, as well as third-party solutions from our technology partner ecosystem, to provide contextual awareness across all customer touchpoints.The key attributes of the 8x8 XCaaS platform include:•A unified, cloud-native platform for contact center, communications, and collaboration, fostering efficient engagements across geographies and departmental lines, as well as improved user productivity and data security.•Flexible service plans and deployment options to match product features to users' customer engagement profiles.•Artificial Intelligence-enabled workflow automation and self-service, enhancing customer experience with features like rapid escalation, intelligent routing and contextual awareness.•Comprehensive data capture on customer interactions with real-time analytics, orchestrated across multiple channels and devices, enabling actionable business insights.•Intuitive, composable user interfaces, allowing users to quickly customize their workspaces for easy access to the tools and data needed.•Seamless user experience across multiple devices.•Microsoft Teams integration for enhanced internal and external communication capabilities for Microsoft Teams users.•Extensive third-party integrations, supported by a broad ecosystem of artificial intelligence technology partners, systems integrators, and resellers.•Strong focus on security and compliance that meets or exceeds industry standards, ensuring data protection.•Patented Global Reach technology ensuring superior service quality and data compliance for international operations.These features position our platform as a leader in cloud communications, empowering businesses to deliver exceptional customer experiences and achieve significant efficiencies.Our SolutionsThrough our integrated technology platform, we offer our customers a portfolio of solutions for contact center, customer engagement, voice, video, chat, short messaging service and team collaboration, unified through a set of shared services, including a common data platform, advanced analytics, reporting, and automated workflows. Our solutions are often tailored to specific use cases and vertical markets with embeddable communication application program interfaces that integrate capabilities from our technology partner ecosystem.Our portfolio of solutions includes:•8x8 Work: a self-contained, feature-rich, end-to-end unified communications as a service solution that delivers enterprise-grade voice services, secure video meetings, and unified messaging including direct messages, public and private team messaging rooms, and peer-to-peer short and multimedia messaging, or SMS/MMS. Through our Global Reach technology, 8x8 Work enables full public switched telephone network, or PSTN, connectivity in approximately 60 countries. Our global footprint simplifies administration and relieves customers from the burden of maintaining separate relationships with regional and national carriers and navigating complex regulatory environments across multiple geographies.•8x8 Contact Center: a cloud-based contact center as-a-service solution that includes omnichannel customer engagement, advanced analytics, artificial intelligence-enabled self-service automation, payment card industry-compliant secure payments, workforce management and employee collaboration. Our composable user workspaces provide rich customer data for contextual awareness and allow users to manage multiple views and productivity tools from a “single pane of glass.”•8x8 Engage: an artificial intelligence-powered, tailored solution that equips customer-facing employees outside the contact center with the tools and capabilities to deliver consistent, successful customer engagements. Combining platform capabilities traditionally available either only in unified communications as-a-service or contact center as-a-service solutions, 8x8 Engage leverages the common customer interaction data platform to provide rich data insights that are contextual and pervasive to help users outside the contact center deliver an exceptional level of service.•8x8 Communications Platform as-a-Service: a comprehensive set of global communications platform-as-a-service capabilities that enable businesses to directly integrate our platform services within their websites, mobile apps and business systems for personalized customer engagement at a high scale. Our short messaging service, Chat App, Video Interaction, 8x8 Jitsi-as-a-Service, and Voice application program interfaces enable companies to reach their 5customers anywhere with a proven, reliable global network. Our communications platform as-a-service portfolio also includes Proactive Outreach, an application-to-person outbound customer engagement solution powered by 8x8’s programmable short messaging service and WhatsApp capabilities that enables personalized outbound messaging campaigns, organization-wide alerts and two-way bulk messaging. Campaign management features include scheduling, advanced routing, reporting and analytics and more.•Solutions for Microsoft Teams: integrations with Microsoft Teams that provide reliable, integrated global telephony and customer engagement capabilities to Microsoft Teams users, including value added services such as integrated business messaging, conversational artificial intelligence, and advanced analytics. 8x8 offers one of the broadest set of enterprise voice integrations with Microsoft Teams. Our Teams integrations portfolio also include 8x8 Operator Connect and 8x8 Voice for Microsoft Teams, a purpose-built solution offering native public switched telephone network calling in Microsoft Teams through 8x8 Operator Connect for Microsoft Teams. 8x8 Contact Center for Microsoft Teams is a Microsoft-certified solution that leverages the 8x8 Operator Connect model to provide omnichannel contact center functionality.The capabilities of our communications and contact center solutions are packaged into comprehensive service offerings called the 8x8 “X Series." Generally, X1 through X4 Series service plans provide enterprise-grade voice, unified communications, video meetings, and team collaboration functionality, as well as contact center-like features for users with direct customer engagement. and X5 through X8 Series service plans include provide the features of X1 through X4, plus contact center functionality. These service plans deliver tailored employee and customer experiences through integrated cloud communication, contact center software, and video meetings solutions. The advanced features and analytics of the 8x8 contact center service plans allow organizations to deliver personalized customer experiences, while scaling their contact center capacity though artificial intelligence-based self-service bots, and intelligent call routing.Our detailed service plans allow our customers to match features and functionality to each user's customer engagement profile, paying for only those capabilities the business needs, while providing businesses with an upgrade path over time as their needs evolve and grow.Technology Partner EcosystemOur technology partner ecosystem is a carefully curated selection of independent software vendors, or ISVs, value-added resellers, or VARs, and systems integrators that have been selected to deliver high value solutions purpose-built for specific use cases or vertical markets. These solutions are integrated at both the platform and user interface layers to simplify implementation and provide native-like experiences to users. The ecosystem includes leading providers of solutions for conversational artificial intelligence, information technology operations, customer relationship management, employee experience (including artificial intelligence-powered agent assist), workforce engagement and management, and implementation services.Routes to MarketWe sell directly to customers or through indirect sales channels. Our indirect sales channel consists of partners with multiple operating models, including global and regional networks of value-added resellers and carriers, as well as a partner network consisting of master agents and the sub-agent community, independent software vendors, system integrators, and service providers selling 8x8 solutions to small, mid-market, and enterprise businesses. Our Elevate channel program supports multiple routes to market for partners, including both resale (wholesale) and agency models, and also offers 8x8 sales and technical certifications. In addition to direct and indirect sales motions, we jointly go-to-market with some of our technology partner ecosystem partners through a 3-tiered program based on the degree of platform integration.Our CustomersWe have a diverse customer base of more than 57,000 customers, with more than 3.0 million paid business licenses, with users in over 160 countries, including small business, mid-market and enterprise customers, and across a wide range of industries and use cases. No single customer represented 10% or more of our revenue in fiscal 2024, 2023, or 2022. Marketing and Promotional ActivitiesWe market our services directly to end users through a variety of means, including industry conferences, trade shows, webinars, local and digital advertising channels targeting mid-market and enterprise customers. We conduct detailed analyses of the quantity and quality of leads generated by our programs and events and adjust our program mix to emphasize marketing opportunities with the highest demonstrated return on investment.As we transform our go-to-market to align with the buying patterns of small and mid-sized enterprises and customer experience leaders, we reduced our investment in digital advertising compared to prior periods in favor of in-person small groups, targeted user groups, customer experience associations and one-on-one meetings with customers and prospects in fiscal year 2024. We also shifted from a capacity-led sales model to a performance-based model, with incremental investment in discretionary sales and marketing programs predicated on demonstrated sales productivity. These changes are designed to improve sales efficiency and increase awareness of our expanded solution portfolio and our commitment to our customers’ business success. To support these initiatives, we also expanded our reference-based peer-to-peer marketing programs.6To ensure customer feedback continues to be heard and incorporated in our development plans, we established 8x8 Customer Labs and created our Customer Advisory Board. Our Customer Labs manages our new product beta programs and other research projects providing direct customer feedback on the features and usability of our products. Our Customer Advisory Board meets several times a year to advise us as we evolve our long-term strategy and product roadmap.Research and DevelopmentThe cloud communications market is characterized by rapid technological changes and advancements typical of most SaaS markets. Accordingly, we make substantial investments in innovation focused on the design and development of new products and services, as well as the development of enhancements and features to our existing products and services. We make these enhancements available to our customers frequently. We currently employ individuals in research, development, and engineering activities in the United States, Canada, United Kingdom, Portugal, Romania, Singapore, and Philippines, as well as outsourced software development consultants around the world.Intellectual PropertyAs of March 31, 2024, we hold at least 372 patents, with another 97 United States and foreign patent applications pending. Our portfolio of patents, with expiration dates through 2042, and patent applications cover diverse aspects of our unified communications, video, application program interface and integrations, collaboration, contact center services, infrastructure, and user experience design and functionality.Our business relies on a combination of trade secrets, patents, copyrights, trademarks laws, and contractual restrictions, such as confidentiality agreements, licenses, and intellectual property assignment agreements. We require our employees, contractors, and other third parties to sign agreements providing for the maintenance of confidentiality and also the assignment of rights to inventions made by them while providing services to us. We also use software components in our platform that are licensed to the public under open-source licenses.See the section entitled “Risks Related to Intellectual Property” in Part I, Item 1A "Risk Factors" for more information on our intellectual property risks.CompetitionThe cloud communications industry is competitive and rapidly evolving. We expect the industry to be increasingly competitive in the future due to a number of factors including, but not limited to, the entry of new competitors into the market or the consolidation of existing competitors. Because we offer multiple services from a single platform, we compete with businesses in several overlapping industries, including voice, video meetings, chat, team messaging, contact center and enterprise-class application program interface solutions.In connection with our voice, video meetings, chat, team messaging, contact center, and enterprise-class application program interface solutions, we face competition from other cloud service providers such as RingCentral, Inc., Genesys Telecommunications Laboratories, Inc., Zoom Video Communications, Inc., Vonage Holdings Corp.(acquired by Ericsson), Five9, Inc., NICE inContact, Inc., Talkdesk, Inc., and Twilio Inc., among others, as well as from legacy on-premises communications equipment providers, such as Avaya, Inc., Cisco Systems, Inc., and Mitel Networks Corp.We also face competition from internet and cloud service companies such as Alphabet Inc. (Google Voice and Google Meet), Amazon Inc., and Microsoft Corporation. Some of these competitors have developed software solutions for their respective communications and/or collaboration silos, such as Microsoft, which is investing significantly in its Microsoft Teams unified communication and collaboration product. Any of these companies could launch a new cloud-based business communications service, expand its existing offerings to compete with features of our services, or enter into a strategic partnership with, or complete an acquisition of, one or more of our cloud communications competitors.Many of our current and potential competitors have greater resources and brand awareness and a larger base of customers than we have. As a result, these competitors may have greater marketing credibility. They also may adopt more aggressive pricing policies and devote greater resources to the development, promotion, and sale of their products and services. Our competitors may also offer bundled service arrangements that present a more differentiated or better integrated product and services to customers. Increased competition could require us to lower our prices, reduce our sales revenue, increase our gross losses or cause us to lose market share. Announcements or expectations as to the introduction of new products and technologies by our competitors or us could cause customers to defer purchases of our existing products and services, which also could have a material adverse effect on our business, financial condition, or operating results.Given the significant price competition in the markets for our services, we may be at a disadvantage compared with those competitors who have substantially greater resources than us or may otherwise be better positioned to withstand an extended period of downward pricing pressure. The harm to our business may be magnified if we are unable to adjust our expenses to compensate for such shortfall, or if we determine that we need to increase our marketing and sales efforts in order to attract new customers and retain existing customers. See the section entitled “Risks Related to Our Business and Industry” in Part I, Item 1A "Risk Factors" for more information on our risks related to competition.7OperationsOur operations infrastructure consists of data management, security, quality monitoring and control, and billing systems that support the portfolio of communication and contact center services plans provided by our XCaaS platform. We invest substantial resources to further develop and manage our service monitoring real-time call management information system. Key elements of our operations infrastructure include customer quoting and ordering capabilities, customer provisioning, customer access control, fraud control, network security, video, voice and short messaging service message routing, quality monitoring, media processing and normalization, call reliability, detailed call record and message storage, transactional metering for usage-based services, product interfaces and billing and integration with third-party applications. Our software platform manages the admission, control, rating, and routing of calls and short messaging service messages to their appropriate destinations. The platform and its assets have been built to offer connectivity, redundancy, security, and scalability. Our tools and processes aim at maximizing communications range, quality, and reliability.Network Operations Center: We maintain global network operations centers around the world and employ experienced staff in voice and data operations in the United States, United Kingdom, Romania, Indonesia, Singapore, and Philippines to provide 24-hour operations support, seven days per week, whether working in our network operations centers or remotely. We use various tools, including an extensive set of synthetic tests and Application Performance Monitoring software, to monitor and manage our network, as well as the networks of our partners and certain larger customers, in real time. We also rely upon the network operations centers of our telecommunications carrier partners and data center providers to augment our monitoring and response efforts. Our globally dispersed operations and remote working capabilities allow us to maintain redundant back-up operations services to minimize or eliminate the impact of local disruptions at any of our operations centers or data centers.In the event of a major disruption at a data center, such as a natural disaster or service disruptions caused by the COVID-19 pandemic, failover between data centers or public cloud regions for the 8x8 X Series is designed to occur with no or minimal disruption. Customer and Technical Support: 8x8 maintains a global customer support organization with operations in the United States, United Kingdom, Philippines, Singapore, Australia, India, and Romania. Customers can access 8x8 customer support services directly from the company website, or receive multi-channel technical support via phone, chat, web, and short messaging service. Emergency support is available on a 24/7 basis.We take a lifecycle approach to customer support, supporting customers from on-boarding to deployment, and through the renewal process, to drive greater user adoption of 8x8 solutions. For our larger enterprise customers, our implementation methodology utilizes a deployment management team and provides active support through the "go-live" date at each customer site. We also have a premium success program, and for certain customers, a dedicated customer success manager as a focal point of contact for every aspect of the post-sale relationship. Finally, we offer a variety of training classes through 8x8 University, either through instructor-led classes or self-paced online learning.Interconnection Agreements: We have agreements with short messaging service, voice, and mobile network operators worldwide. Pursuant to these agreements, we can provide inbound and outbound telephone and short messaging services to traditional telecommunication systems and mobile networks worldwide through our platform via these carriers.Regulatory MattersIn the United States, at the federal level, we are subject to regulation by the Federal Communications Commission (the "FCC") as a provider of Voice over Internet Protocol, or VoIP, as well as state and local regulations applicable to Voice over Internet Protocol providers. For example, regulations we are subject to include E-911 services, porting of phone numbers under specific conditions, protection of customer data generated by the use of our services, and obligations to contribute to federal programs, including Universal Service Fund and other regulatory funds, as well as state and local 911 and universal service funds.In addition to regulations at the federal and state levels, many states are also enacting privacy legislation that apply to companies like us, which collect, store, and process many types of data, including personal data. California has enacted the California Consumer Privacy Act (the "CCPA") and adopted the California Privacy Rights Act (the “CPRA"). The CCPA and the CPRA impose new obligations on qualifying for-profit companies, like us, doing business in California and substantially increases potential liability for such companies for failure to comply with data protection rules applicable to California residents. In addition, Virginia, Colorado, Connecticut and Utah enacted new comprehensive privacy laws. Texas, Oregon, and Montana have enacted new privacy laws that will become effective in 2024. Delaware, Iowa, Maryland, New Hampshire, New Jersey, and Tennessee have enacted new privacy laws that will become effective in 2025, and Indiana has enacted a new privacy law that will become effective in 2026. All of these new privacy laws impose new obligations on us.Internationally, we are subject to a complex patchwork of regulations that vary from country to country. Countries have adopted laws that impose stringent licensing obligations on providers of Voice over Internet Protocol services like ours. In many countries, it is not clear how laws that have historically been applied to traditional telecommunications providers will be applied to providers of Voice over Internet Protocol services like us. In the European Union (the "EU"), the General Data Protection Regulation (the "GDPR") imposes obligations on all companies like us that collect, store, and process many types of data, including personal data, and substantially increases potential liability for all companies, including us, for failure to comply with data protection rules.8The effect of any future laws, regulations, and orders or any changes in existing laws or their enforcement, including the application of new taxes and regulations on communication applications like ours running over the internet, on our operations cannot be determined. See the section entitled “Risks Related to Regulatory Matters” in Part I, Item 1A "Risk Factors" for more information on these risks.Geographic AreasWe have one reportable segment. Financial information relating to revenue generated in different geographic areas are set forth in Note 12, Geographical Information, in the Notes to Consolidated Financial Statements contained in this Annual Report.Employees and Human CapitalAs of March 31, 2024, we had 1,948 full-time employees operating around the world, of which 67% are located outside of the United States. None of our employees are represented by a labor union or are subject to a collective bargaining arrangement.As a leading provider of software-as-a-service solutions for contact center, voice communications, video meetings, employee collaboration and embeddable communication application program interfaces, we are thoughtful about our impact on our stockholders, our customers, our people, and the planet. We conduct our business ethically and are committed to strong corporate governance, universal human rights, and sustainable business practices. We strive to create a work environment and culture that embraces creativity and diversity and is financially and personally rewarding for our people.Culture and Engagement: 8x8 is transforming modern business communications. We take pride in our innovations that empower employees and enable our customers to build more agile workplaces. Our efforts are anchored by our value system. These values define how we work, infuse our daily culture, and make us individually and collectively accountable for our progress. They also serve as the framework for our extensive onboarding program for new hires and ongoing employee training and support.We support a hybrid work environment and continue to seek out innovative ways to leverage our 8x8 Work communication and collaboration platform to keep our employees connected to each other and maintain a positive and supportive work culture. In fiscal 2023 we launched Team8s, our branded employee engagement program, and we continue to expand initiatives under the Team8s umbrella. These include a redesigned and expanded intranet site, regular global and regional activities, a Team8s award program, and Boomerang recognition for employees who left 8x8 and have elected to return.As a global company, we believe that building a culture and maintaining high levels of employee engagement requires sensitivity to local customs, and coordinated effort at the global and regional levels. In fiscal 2024, we established site committees in each of our regional locations. The site committees play a key role in fostering employee engagement, overseeing health and safety initiatives, and implementing corporate-wide initiatives at the local and regional levels. The committees are also responsible for company-sponsored community involvement events consistent with our social value policy. To support our Team8s involvement in their communities, we offer two paid days off for service per year.We conduct quarterly employee surveys to gain insight into trends in employee engagement and prioritize new benefits and programs. Based on the results of engagement surveys, we increased communications on our strategic direction, developed programs to provide greater clarity on expectations, and expanded learning and development programs. The following programs are ongoing:•We continue to host quarterly all-hands meetings, during which we review our corporate objectives and our progress, highlight customer stories, and recognize teams and individual contributors for their accomplishments. We schedule two sessions for each meeting so employees in all time zones can participate and each meeting includes an open question and answer session.•Our CEO writes a weekly communication to all employees on a wide range of topics, including our value system, customer stories, product and innovation highlights and corporate culture.•Creation of a “Day in the Life” video series to help Team8s better understand various roles at 8x8. The first two episodes focused on “Day in the Life of a Deal” and “Day in the Life of Customer Service”.•We updated our processes for establishing individual goals and encourage managers to meet with their direct reports to discuss objectives and performance several times per year. We provide training and coaching to managers to facilitate these sessions.•We expanded our learning and development programs.9Learning and Development – We are committed to professional growth and development for all 8x8 employees equally. We have four types of training programs for our 8x8 Team8s:•LinkedIn Learning - This rich curriculum consists of more than 1,700 individual courses, thousands of videos, and numerous certifications and assessments is offered to all Team8s, emphasizing alignment with individual development plans. Since its initial offering in early calendar 2023, LinkedIn usage by Team8s ranked 8x8 in the top 20% of corporate subscribers.•Accerler8 Manager Training - This curriculum provides a multi-media experience for new and experienced managers alike. Utilizing in-person and virtual classroom instruction, focus group collaboration, small workgroup exercises, and individual study, the first fifteen cohorts found the program enlightening and energizing. After completing the initial four-month guided instruction, managers can access the program’s vast library of materials for the following year. Additionally, Manager Minutes, quick tips and tricks for managers, is scheduled to begin distribution in Q1 fiscal 2025.•Senior Leadership Assessment and Coaching - Leaders at the vice president level and above were provided a commercially available behavioral assessment and assigned coaches for personal support and development assistance. Additionally, they were given the opportunity to use a commercially available 360 platform, Roster, to enhance self-awareness. The next phase will encompass senior directors and new vice presidents and above with the same learning opportunities.•Product Technical Training – We tested two platforms to encourage employee growth in technical skills and coding expediency. With the evaluation complete, we now offer these platforms to our technical teams globally.Diversity, Equity, Inclusion, and Belonging – As a communications company with a growing international presence, it is vital that our workforce be as diverse as the customers we serve. Our commitment to diversity is visible from the boardroom to the server rooms. We have put in place several programs to ensure that we are continuously improving, including establishing a diversity council, embedding overcoming unconscious bias training in our company wide training curriculum and performance feedback process, and maintaining open "rooms" on the 8x8 Work app that serve as discussion forums for diversity, equity and inclusion topics. Employee resource groups are also being formed to serve the interests of women, LGBTQ+ individuals, and women in technical roles.When hiring, we strive to keep our candidate pools as diverse as possible to bring new viewpoints into the 8x8 team. Additionally, we conduct role and gender pay equity audits to ensure pay equity by position. Other activities in fiscal 2024 included:•Regular meetings of the employee diversity, equity, inclusion, and belonging council and the formation of a Leadership Steering Committee to provide executive support for and serve as the sounding board for the employee diversity, equity, inclusion and belonging council.•Pages dedicated to diversity, equity, inclusion and belonging on our internal Team8s site providing employees to provide employees with access to further information on our initiatives and resources.•Activities to celebrate International Women's Day in locations worldwide and Veterans Day in U.S. locations, including videos of our employees speaking to the importance and value of supporting diversity, equity, inclusion and belonging in the workplace.Rewards - We strive to provide competitive total rewards packages to hire and retain the key talent we need to achieve our growth and profitability objectives. This includes competitive cash compensation, equity grants of restricted stock units, or RSUs, and performance-based stock units, or PSUs.We also offer benefits to care for the total health of our employees and their families, including health and dental insurance, paid medical and parental leave, Company-funded short-and long-term disability, and matching 401K contributions. We also offer Company-funded mental health services, support for working parents, webinars on financial well-being, and other services through our global employee assistance program.All employees can become stakeholders in 8x8 through our Employee Stock Purchase Plan, which allows employees to purchase up to $25,000 in market value per year of 8x8 stock through payroll deductions.Available InformationWe maintain a corporate Internet website at the address http://www.8x8.com. The contents of this website are not incorporated in or otherwise to be regarded as part of this Annual Report. We file reports with the Securities and Exchange Commission, or the SEC, which are available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, registration statements, proxy statements, and amendments to such reports, each of which is provided on our website as soon as reasonably practicable after we electronically file such materials with or furnish them to the Securities and Exchange Commission. In addition, the Securities and Exchange Commission maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission, including 8x8.10Information About Our Executive OfficersOur executive officers as of the date of this report are listed below.Samuel Wilson, Chief Executive Officer. Samuel Wilson, age 55, has served as Chief Executive Officer since May 2023 and previously served as Interim Chief Executive Officer from November 2022 to May 2023. Mr. Wilson previously served as our Chief Financial Officer from June 2020 to November 2022. Prior to his appointment, Mr. Wilson served as Chief Customer Officer and Managing Director of EMEA from January 2020 until June 2020. From September 2017 until January 2020, Mr. Wilson served as Senior Vice President responsible for e-commerce, global small business, and United States mid-market sales. Prior to joining 8x8, Mr. Wilson served as VP Finance for MobileIron, an enterprise software security company, from 2011 until 2017 with responsibilities for financial planning and analysis, investor relations, and treasury functions, as well as e-commerce. Mr. Wilson is a Chartered Financial Analyst. He holds a Bachelor’s Degree in Electrical Engineering from Seattle University and an MBA from the University of California, Berkeley.Kevin Kraus, Chief Financial Officer. Kevin Kraus, age 54, has served as Chief Financial Officer since June 2023. Mr. Kraus previously served as Interim Chief Financial Officer from November 2022 to June 2023. Prior to serving as Interim Chief Financial Officer, Mr. Kraus previously served as our Senior Vice President of Finance from October 2019 to November 2022, with responsibility for overseeing the Company’s financial reporting, planning, and procurement functions. From February 2018 to May 2019, Mr. Kraus served as Vice President, Finance for Imperva, a cybersecurity software company. From January 2015 to September 2017, Mr. Kraus served as Senior Director, Finance for Gigamon, a network visibility and traffic monitoring technology company. Mr. Kraus is a Certified Public Accountant. He holds a bachelor’s degree in accounting from Rutgers, The State University of New Jersey-New Brunswick and an MBA from the Pennsylvania State University.Hunter Middleton, Chief Product Officer. Hunter Middleton, age 57, has served as Chief Product Officer since August 2021. Mr. Middleton previously served as our SVP of Product and Design from March 2018 to August 2021. From February 2016 to September 2017, Mr. Middleton served as Vice President and Head of Product Management for Jive Software, Inc., an enterprise social collaboration application provider. Prior to that, Mr. Middleton served as the Head of Product Management at Google for Work Systems and led the Google Apps Enterprise product team. Mr. Middleton earned his Ph.D. in Physics from Princeton University and holds a master’s degree in management from the Kellogg Graduate School of Business at Northwestern University.Laurence Denny, Chief Legal Officer. Laurence Denny, age 51, has served as Chief Legal Officer and Corporate Secretary since December 2022. Mr. Denny previously served as our Chief Compliance Officer, Deputy General Counsel and Assistant Corporate Secretary from June 2022 to December 2022 and as our Vice President, Deputy General Counsel and Assistant Corporate Secretary from April 2019 to June 2022, with responsibility for assisting with the oversight of the Company’s global legal, corporate, litigation, employment, procurement, compliance, and security efforts. From January to April 2019 Mr. Denny served as Vice President, Deputy General Counsel and Assistant Corporate Secretary for Extreme Networks, a network equipment company. From September 2016 to January 2019, Mr. Denny was Vice President, Deputy General Counsel and Assistant Corporate Secretary of TiVo Corporation (formerly known as Rovi Corporation), a digital entertainment technology company. Mr. Denny is a member of the State Bar of California. He graduated from University of California, Irvine with a Bachelor of Arts and from Columbia Law School with a Juris Doctorate.Suzy Seandel, Chief Accounting Officer. Suzy Seandel, age 59, has served as Chief Accounting Officer since May 2022. From February 2019 to May 2022 Ms. Seandel served as VP, Corporate Controller for Barracuda Networks, Inc., a security, networking and storage products company. From January 2007 to October 2018, Ms. Seandel served as Chief Accounting Officer at Cavium, Inc., a fabless semiconductor company. Prior to Cavium, Inc., Ms. Seandel also held positions of increasing responsibility at several other publicly traded companies and spent nearly five years at Deloitte & Touche LLP in assurance and audit services. Ms. Seandel holds a Bachelor of Science degree in Finance from Santa Clara University and is a Certified Public Accountant in the state of California.11ITEM 1A. RISK FACTORSOur operations and financial results are subject to various risks and uncertainties. You should consider carefully the risks and uncertainties described below, together with all of the other information in this report. If any of the following risks or other risks actually occur, our business, financial condition, results of operations, and future prospects could be materially harmed, and the price of our common stock could decline. Our business could also be materially and adversely affected by risks and uncertainties that are not presently known to us or that we currently believe are not material. Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our results of operations, financial condition, reputation, and future prospects.Risk Factors Table of ContentsRisk Factors SummaryRisks Related to our Business and IndustryRisks Related to our Products and OperationsRisks Related to Regulatory MattersRisks Related to Intellectual PropertyRisks Related to our Debt, our Stock, and our CharterGeneral Risk FactorsRisk Factors SummaryOur business is subject to a number of risks that may adversely affect our business, financial condition, results of operations, and cash flows. These risks are discussed more fully below and include, but are not limited to:Risks Related to our Business and Industry•Our history of losses and anticipated continued losses.•Unpredictability of our future operating results.•Reductions in either spending or collections may result in reductions in revenue.•Future increases in our customer churn.•Dependence on new customer acquisition and retention and upsell to existing customers.•Intense competition in our industry.•Failure to manage and grow our indirect sales channels.•Complexity and length of enterprise customer sales cycle.•Dependence on new product and services to maintain and grow our business.•Difficulty attracting and retaining key management, technical and sales personnel.•We may not realize all of the anticipated benefits of our acquisition of Fuze, Inc.•Potential past and future liabilities related to federal, state, local and international taxes, fees, surcharges and levees.•We may incur impairments to goodwill, intangible assets or long-lived assets.Risks Related to our Products and Operations•Service outages due to software vulnerabilities or failures of physical infrastructure.•Scalability of our cloud software services to meet existing and new customer demand.•Risks related to international expansion, including the Russia and Ukraine war.•Risks related to current and future acquisitions.•Our ability to maintain compatibility with third-party applications and mobile platforms.•Reliance on third-parties to provide network services and connectivity.•Reliance on third-party vendors for IP phones and certain software endpoints.•Difficulty executing local number porting requests.Risks Related to Regulatory Matters•Risks related to cybersecurity breaches and malicious acts.•Liabilities related to credit card transaction processing services.•Failure to comply with data privacy and protection laws.•Services must comply with industry standards and government regulations.12Risks Related to Intellectual Property•Infringement of third-party proprietary technology.•Inability to protect our proprietary technology.•Inability to use third-party or open-source software.Risks Related to our Debt, our Stock, and our Charter•Cash flow may be insufficient to service or pay down our substantial debt.•Inability to raise necessary funds in the future.•Conditional conversion features of our debt could adversely affect our financial condition.•Change in accounting standards, including for our debt, may cause adverse financial reporting fluctuations and affect our reported operating results.•The current instability in the banking system could adversely impact our operations.•Future sales of common stock or equity-linked securities.•Certain provisions in our charter may discourage takeover attempts.General Risk Factors•Risks related to the ongoing impact of the COVID-19 pandemic.•Secure financing on favorable terms.•Risks related to natural disasters, war, terrorist attacks, global pandemics, and other unforeseen events.Risks Related to our Business and IndustryWe have a history of losses, have incurred significant negative cash flows in the past, and anticipate continuing losses in the future. As such, we may not be able to achieve or maintain profitability in the future.We recorded an operating loss of approximately $27.6 million for the year ended March 31, 2024, and ended the period with an accumulated deficit of approximately $860.5 million. We expect to continue to incur operating losses in the near future as we continue to invest in our business. During our fiscal year ending March 31, 2025, we intend to continue to invest in sales and marketing and research and development, among other areas of our business, to compete more successfully for the business of companies that are transitioning to cloud communications and otherwise position ourselves to take advantage of long-term revenue-generating opportunities.We expect to continue to incur losses for at least the next fiscal year and later, and we will need to increase our revenue to generate and sustain operating profitability in future periods. The investments we have made in fiscal 2024 and beyond may not generate the returns that we anticipate, which could adversely impact our financial condition and make it more difficult for us to grow revenue and/or achieve profitability in the time period that we expect, or not at all. In order to achieve profitability, we will need to manage our cost structure more efficiently and not incur significant liabilities, while continuing to grow our revenue. Despite these efforts, our revenue may continue to decline, and/or we may incur significant losses in the future due to inflationary pressures impacting our cost structure, Russia's invasion of Ukraine, the conflict between Israel and Hamas and Israel and Iran or other geopolitical events, any further downturn in general economic conditions, increasing competition (including competitive pricing pressures and large competitors moving into our markets), decrease in the adoption or sustained use of the cloud communications market, exiting lines of business, interest rate and foreign currency fluctuations, or our inability to execute on business opportunities. Given our history of fluctuating revenue and operating losses, we cannot be certain that we will be able to achieve or maintain operating profitability in the future.Our future operating results, including revenue, expenses, losses, profits, and operating cash flow, may vary substantially from period to period and may be difficult to predict. As a result, we may fail to meet or exceed the expectations of market analysts or investors, which could negatively impact our stock price.Our historical operating results have fluctuated and are expected to continue to fluctuate in the future. A decline in our operating results could cause our stock price to fall. There are a number of factors that may affect our operating results on a quarterly, annual, or longer-term basis, some of which are outside our control. These include, but are not limited to:•changes in the markets we compete in, including reductions in market growth or consolidation among competitors, channel partners, or customers; •changes in customer demand, including cancellations, subscription downgrades, or substitution of our lower-priced, less feature-full products for our higher-priced, more feature-full products;•changes in the competitive dynamics in our markets, including competitors increasing compensation payable to channel partners or increasing discounts or credits issued to customers;•lengthy sales cycles;•changes in regulatory requirements or lengthy regulatory approval cycles;•new product introductions by us or our competitors;•unpredictability of usage-based revenue products that do not involve long-term subscription commitments;•the mix of our customer base, sales channels, and services sold;•the number of additional customers, on a net basis;13•the amount and timing of costs associated with recruiting, training, and integrating new employees;•the retention of our senior management and other key employees, their ability to execute on our business plan and the loss of services of senior management or other key employees, whether in the past or in the future;•unforeseen costs and expenses related to the expansion of our business, operations, and infrastructure;•our dependency on third-party vendors of hardware, software, and services that we resell to our customers, including the effects of supplier price increases which we are unable to pass along to our customers;•our ability to execute our operating plans successfully, including back-office system optimizations and increases in execution speed while also reducing costs and optimizing our operating margin;•continued compliance with industry standards and regulatory requirements;•decline in usage related to increases in return to office;•material security breaches or service interruptions due to cyberattacks or infrastructure failures or unavailability; and•introduction and adoption of our cloud software solutions in markets outside of the United States.It is possible that in some future periods our results of operations may be below the expectations of public market analysts and investors.In addition, changes in regulations, accounting principles, and our interpretation of these and judgments used in applying them, could have a material effect on our results of operations. We also need to revise our business processes, systems, and controls, which require significant management attention and may negatively affect our financial reporting obligations. If any of these events were to occur, the price of our common stock would likely decline significantly.Any reduction in our spending may not achieve the desired result or may result in a reduction in revenue.Our increased emphasis on profitability and cash flow generation may not be successful. We intend to reduce our total costs as a percentage of revenue, primarily impacting our sales and marketing expenses. There can be no assurances that our cost reduction initiatives will result in the cost savings that we anticipate as a percentage of our revenue and will not have unintended or unforeseen consequences, including a further reduction in revenue. We have experienced a reduction in revenue recently, which may have resulted from our cost reduction initiatives.Churn in our customer base adversely impacts our revenue and requires us to spend money to retain existing customers and to capture replacement customers. If we experience increases in customer churn in the future, our revenue growth will be adversely impacted and our customer retention costs will increase.Our customers may elect not to renew their subscriptions at the end of their contractual commitments, either entirely or by reducing the contracted services, resulting in reduced revenue from those customers. Because of churn in our customer base, we must acquire new customers and sell additional 8x8 products and services to our existing customers on an ongoing basis to maintain our existing level of revenue. As a result, sales and marketing expenditures are an ongoing requirement of our business. Our ability to maintain and grow our revenue is adversely impacted by the rate at which our customers cancel or downgrade services. Churn reduces our revenue growth rate, and if our churn rate increases, we must acquire even more new customers and/or sell more products and services to existing customers, to maintain and grow our revenue. We incur significant costs to acquire new customers, and those costs are a meaningful component in driving our net profitability. Churn may also prevent us from increasing the price of our services in the future, as well as limit our ability to sell additional 8x8 products and services to our existing customers and we may need to renew certain customers at a lower rate, of which each case would adversely impact our revenue in the future. Therefore, if we are unsuccessful in managing our existing customer churn and/or our customer churn rate increases in the future our revenue growth would decrease and our revenue may decline, causing our net loss to increase.Our rate of customer cancellations or downgrades in services may increase in future periods due to a number of factors, some of which are beyond our control, such as the financial condition of our customers, the general economic environment, or significant shifts in geopolitical stability that affect global markets. Additionally, challenges in international expansion, including navigating diverse regulatory landscapes and adapting to local market conditions, may influence our ability to maintain or grow our customer base in certain regions. Pricing, competitive products, and migration of our customers from Fuze or other legacy products all can contribute to churn. If we are unable to maintain the quality and performance of our service whether due to a lack of feature parity or quality of service relative to the products of our competitors or service outages or disruptions, we could experience potentially sharp increases in customer cancellations and/or downgrades or customer credits which would adversely impact our revenue.14Our success hinges on our ability to acquire new customers and retain and sell additional services to our existing customers.We generate revenue primarily from the sale of subscriptions to our cloud communications services to our customers, which include small business, mid-market and enterprise customers as well as government agencies and other organizations. We define a “customer” as the legal entity or entities to which we provide services pursuant to a single contractual arrangement. Our future success depends on our ability to increase the amount of revenue we generate from new and existing customers.If our sales and marketing efforts are not effective in identifying and qualifying prospective new customers, demonstrating the quality, value, features and capabilities of our solutions, especially XCaaS, to those prospects and promoting our brand generally, we may not be able to acquire new customers at the rate necessary to achieve our revenue targets. We must also continue to design, develop, offer and sell services with quality, cost, features and capabilities that compare favorably to those offered by our competitors. As our target markets mature, or as competitors introduce lower cost and/or more differentiated products or services that compete or are perceived to compete with ours, we may be unable to attract new customers, on favorable terms, or at all, which could have an adverse effect on our revenue.In addition to acquiring new customers, we generate new revenue by selling our existing customers additional quantities of subscribed services, or subscriptions to new or upgraded services. Particularly in the case of large enterprises, we often have opportunities to expand the sale of our services within an organization after we have completed an initial sale to one part of the organization (for example, a business unit, division or department, or personnel based in a particular country or region) and the organization has qualified us as a vendor. We invest in efforts to educate and train users on the features and capabilities of our services so that they can become advocates within their organizations and encourage increased adoption of our solutions. However, if existing users within an organization are dissatisfied with any aspect of our cloud services, or the technical support, training or other professional services we provide, we may face challenges in up-selling or increasing our penetration of the organization.Intense competition for new customers and retention of existing customers (including pricing pressure) in the markets in which we compete may prevent us from increasing or sustaining our revenue growth, or achieving and maintaining profitability, which could materially harm our business.The cloud communications industry is competitive and rapidly evolving. We expect the industry to be increasingly competitive in the future due to a number of factors including, but not limited to, the entry into the market of new competitors or the consolidation of existing competitors. Because we offer multiple services from a single platform, we compete with businesses in several overlapping industries, including voice, video meetings, chat, team messaging, contact center and enterprise-class application program interface solutions.In connection with our voice, video meetings, chat, team messaging, contact center, and enterprise-class application program interface solutions, we face competition from other cloud service providers such as RingCentral, Inc., Genesys Telecommunications Laboratories, Inc., Zoom Video Communications, Inc., Vonage Holdings Corp.(acquired by Ericsson), Five9, Inc., NICE inContact, Inc., Talkdesk, Inc., and Twilio Inc., among others, as well as from legacy on-premises communications equipment providers, such as Avaya, Inc., Cisco Systems, Inc., and Mitel Networks Corp.We also face competition from Internet and cloud service companies such as Alphabet Inc. (Google Voice and Google Meet), Amazon Inc., and Microsoft Corporation. Some of these competitors have developed software solutions for their respective communications and/or collaboration silos, such as Microsoft, which is investing significantly in its Microsoft Teams unified communication and collaboration product. Any of these companies could launch a new cloud-based business communications service, expand its existing offerings to compete with features of our services, or enter into a strategic partnership with, or complete an acquisition of, one or more of our cloud communications competitors.Many of our current and potential competitors have greater resources and brand awareness and a larger base of customers than we have. As a result, these competitors may have greater marketing credibility. They also may adopt more aggressive pricing policies and devote greater resources to the development, promotion, and sale of their products and services. Our competitors may also offer bundled service arrangements that present a more differentiated or better integrated product and services to customers. Increased competition could require us to lower our prices, reduce our sales revenue, increase our gross losses or cause us to lose market share. Announcements or expectations as to the introduction of new products and technologies by our competitors or us could cause customers to defer purchases of our existing products and services, which also could have a material adverse effect on our business, financial condition, or operating results.Given the significant price competition in the markets for our services, we may be at a disadvantage compared with those competitors who have substantially greater resources than us or may otherwise be better positioned to withstand an extended period of downward pricing pressure. The harm to our business may be magnified if we are unable to adjust our expenses to compensate for such shortfall, or if we determine that we need to increase our marketing and sales efforts in order to attract new customers and retain existing customers.15Failure to grow and manage our network of indirect sales channels partners could materially and adversely impact our revenue in the future.Our future business success, particularly to attract and support larger customers and expand into international markets, depends on our indirect sales channels. These channels consist of master agents and subagents, independent software vendors, system integrators, value-added resellers, and internet service providers, among others. We typically contract directly with the end customer and use these channel partners to identify, qualify and manage prospects throughout the sales cycle, although we also have arrangements with partners who purchase our services for resale to their own customers. As our business with master- and sub-agent partners has increased, we have seen our commission payments to these partners become an increasing portion of our sales and marketing expenses. Our future success depends upon our ability to develop and maintain successful relationships with these business partners, many of whom also market and sell services of our competitors, and our ability to increase the portion of sales opportunities they refer to us. To do so, we must continue to offer services that have quality, price, features, and other elements that compare favorably to those of competing services, ensure our partners are adequately trained and knowledgeable about our services, and provide sufficient incentives for these partners to sell our services in preference to those of our competitors while maintaining a cost-effective agency structure. If we are unable to persuade our existing business partners to increase their sales of our services or to build successful partnerships with new organizations, or if our channel partners are unsuccessful in their marketing and sales efforts, we may not be able to grow our business and increase our revenue at the rate we predict, or at all, and our business may be materially adversely affected.As we increase sales to enterprise customers, our sales process has become more complex and resource-intensive, our average sales cycle has become longer, and the difficulty in predicting when sales will be completed has increased.We currently derive a majority of our revenue from sales of our cloud software solutions to mid-market and enterprise customers, and we believe that increasing our sales to these customers is the key to our future growth. Our sales cycle, which is the time between initial contact with a potential customer and the ultimate sale to that customer, is often lengthy and unpredictable for larger enterprise customers. Many of our prospective enterprise customers do not have prior experience with cloud-based communications or contact centers, and may not appreciate the benefits of a unified platform for both. Therefore, they typically spend significant time and resources evaluating our solutions before they purchase from us. Similarly, we typically spend more time and effort determining their requirements and educating these customers about the benefits and uses of our solutions. Enterprise customers also tend to demand more customizations, integrations, and additional features than smaller customers. As a result, we may be required to divert more sales and engineering resources to a smaller number of large transactions than we have in the past, which means that we will have less personnel available to support other sectors, or we will need to hire additional personnel, which would increase our operating expenses.It is often difficult for us to forecast when a potential enterprise sale will close, the size of the customer's initial service order, and the period over which the implementation will occur, any of which may impact the amount of revenue we recognize or the timing of revenue recognition. Enterprise customers may delay their purchases from one quarter to another as they assess their budget constraints, negotiate early contract terminations with their existing providers, or wait for us to develop new features. Any delay in closing, or failure to close, a large enterprise sales opportunity in a particular quarter or year could significantly harm our projected growth rates and cause the amount of new sales we book to vary significantly from quarter to quarter. We also may have to delay revenue recognition on some of these transactions until the customer's technical or implementation requirements have been met.The market for cloud software solutions is subject to rapid technological change, and we depend on new product and service introductions in order to maintain and grow our business.We operate in an emerging market that is characterized by rapid changes in customer requirements, frequent introductions of new and enhanced products and services, and continuing and rapid technological advancement. To compete successfully in this emerging market, we must continue to design, develop, manufacture, and sell highly scalable new and enhanced cloud software solutions products and services that provide higher levels of performance and reliability at lower cost. If we are unable to develop new products and services that address our customers' needs, to deliver our cloud software solution applications in one seamless integrated service offering that addresses our customers' needs, or to enhance and improve our products and services in a timely manner, we may not be able to achieve or maintain adequate market acceptance of our services.To the extent that we are unable to achieve market acceptance of our unified communications as-a-service and contact center as-a-service products and services, including our X Series, we may be unable to recoup our research and development and marketing costs on the schedule we anticipated, and our results of operations may suffer.Our ability to maintain or grow is also subject to the risk of future disruptive technologies. If new technologies emerge that are able to deliver communications and collaboration solution services at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete.We may have difficulty attracting or retaining senior management and other personnel with the industry experience and technical skills necessary to support our desired growth.Companies in the cloud communications industry compete aggressively for top talent in all areas of business, but particularly in senior management, sales and marketing, professional services, and engineering, where employees with industry experience, technical knowledge and specialized skill sets are particularly valued. In response to a competitive hiring environment, some of 16our competitors are responding by increasing employee compensation, paying more on average than we pay for the same position or offering more attractive equity compensation. Any such disparity in compensation could make us less attractive to candidates as a potential employer, which in turn may make it more difficult for us to hire and retain qualified employees, including senior executives. Training an individual who lacks prior cloud communications experience to be successful in a sales or technical role can take months or even years.If an employee of 8x8 leaves to work for a competitor, not only are we impacted by the loss of the individual resource, but we also face the risk that the individual will share our trade secrets with the competitor in violation of his or her contractual and legal obligations to us. Our competitors have in the past and may in the future target their hiring efforts on a particular department, and if we lose a group of employees to a competitor over a short time period, our day-to-day operations may be impaired. While we may have remedies available to us through litigation, these would likely take significant time and expense and be ineffective to the immediate operational risk as well as divert management attention from other areas of the business.If we increase employee compensation (beyond levels that reflect customary performance-based and/or cost-of-living adjustments) in response to the competitive hiring environment, we may sustain greater operating losses than we predicted in the near term, and we may not achieve profitability within the timeframe we had expected, or at all. In addition, we may need to issue equity at increased levels, now and in the future, to attract and retain key employees and executives, including weighting a greater percentage of our employees' total compensation in the form of equity as opposed to cash, which will have the adverse effect of increasing dilution for our stockholders.We may not realize all of the anticipated benefits of the acquisition of Fuze, Inc.The success of our acquisition of Fuze, Inc. ("Fuze") will depend, in part, on our ability to realize the anticipated growth opportunities and synergies from combining the businesses of our company and Fuze. Our ability to realize these anticipated benefits, and the timing of this realization, depend upon a number of factors and future events, many of which we and Fuze, individually or collectively, cannot control. These factors and events include:•our ability to successfully and timely integrate Fuze’s business and operations with ours;•obtaining and maintaining intellectual property rights relating to Fuze technology;•porting Fuze customers onto our 8x8 platform;•the retention of Fuze’s customers; and•minimizing the diversion of management’s attention from ongoing business concerns.We cannot assure you that any of the foregoing factors will not have an adverse effect on our business, financial condition, and prospects. Acquisitions involve risks, including inaccurate assessment of undisclosed, contingent, or other liabilities or problems. Following the completion of the acquisition, the surviving corporation possesses not only all of the assets, but also all of the liabilities, of Fuze. We have experienced unexpected liabilities as a result of our Fuze acquisition. It is possible that undisclosed, contingent, or other liabilities or problems may arise in the future of which we were previously unaware. These undisclosed liabilities could have an adverse effect on our business, financial condition, and prospects.Taxing authorities have asserted, or could in the future assert, that we should have collected or in the future should collect sales and use, value added, or similar taxes, including on similar services for which our competitors may not be subject to the same obligations. As a result, we could be subject to liability with respect to past or future sales, which have and could adversely affect our business.The applicability of state and local taxes, fees, surcharges or similar taxes to our services is complex, ambiguous, and subject to interpretation and change. In the United States, for example, we collect state and local taxes, fees, and surcharges based on our understanding of the applicable laws in the relevant jurisdiction. The taxing authorities may challenge our interpretation of the laws and may assess additional taxes, penalties, and interests, which could have adverse effects on the results of operations and, to the extent we pass these through to our customers, demand for our services. Additionally, the applicability of sales and use, value added, or similar taxes may differ between services such as unified communication, voice, video, contact center, and platform communications so that the obligations to collect taxes from customers may vary between services and between companies such that we may be obligated to collect taxes at a higher rate that other services from our competitors, thereby impacting customer demand for our services. We currently file more than 1,500 state and local tax returns monthly. Periodically, we have received inquiries from state and municipal taxing agencies with respect to the remittance of state or local taxes, fees, or surcharges. Currently, several jurisdictions are conducting audits of 8x8; in the event our positions are unsuccessful, we may be subject to tax payments, interest, and penalties in excess of those that we have accrued for. As of March 31, 2024, we have paid or accrued for state or local taxes, fees, and surcharges that we believe are required to be remitted.Our ability to use our net operating losses or research tax credits to offset future taxable income is subject to certain limitations.As of March 31, 2024, we had federal net operating loss, or NOL, carryforwards of $1,118.7 million, of which $335.5 million are related to years prior to fiscal 2019 and begin to expire in 2034. The remaining $783.2 million carry forward indefinitely, but can only be used to apply up to 80% of the Company's taxable income for a given tax year. As of March 31, 2024, the Company also had state net operating loss carryforwards of $915.8 million, the majority of which will expire at various dates between 2025 and 2043. In addition, at March 31, 2024, the Company had research and development credit carryforwards for federal and California tax purposes of approximately $16.8 million and $23.4 million, respectively. The federal income tax credit carryforwards will 17expire at various dates between the calendar years 2035 and 2044, while the California income tax credits will carry forward indefinitely. Utilization of our net operating loss and tax credit carryforwards can become subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. A Section 382 ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of the stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Such an ownership change, or any future ownership change, could have a material effect on our ability to utilize the net operating loss or research credit carryforwards. In addition, under the Tax Cuts and Jobs Act, or the Tax Act, the amount of net operating loss that we are permitted to deduct in any taxable year is limited to 80% of the taxable income in such year. There is a risk that due to changes under the Tax Act, regulatory changes, or other unforeseen reasons, the existing net operating loss could expire or otherwise be unavailable to offset future income tax liabilities, which could have a material impact on our net income (loss) in future periods.We may incur impairments to goodwill, intangible assets, or long-lived assets which could negatively impact our operating results and financial condition.The Company has a substantial amount of goodwill, intangible assets and long-lived assets on its consolidated balance sheet. The Company performs an annual test for indications of goodwill, intangible assets and long-lived assets impairment and more often if indicators of impairment exist. The impairment evaluation requires significant judgment and estimates by management, and unfavorable changes in these assumptions or other factors could result in future impairment charges and have a significant adverse impact on the Company’s reported earnings. Such factors include macroeconomic conditions in equity and credit markets, broader industry and market considerations, cost factors including material and labor cost, and the operating and financial performance of the Company. Additionally, a decline in the market valuation of the Company’s common shares, whether related to the Company or overall market conditions, could adversely impact the assumptions used to perform the evaluation of its goodwill, indefinite-lived intangible assets and long-lived assets.In connection with partially ceasing use of the Company’s Headquarters and an international office space, the Company recorded impairment charges of $9.9 million and $1.1 million, respectively, as the carrying amount of the right-of-use assets related to the leases exceeded its fair value based on the Company’s estimate of future discounted cash flows related to the leased facility. During fiscal 2024, the non-cash charge of $11.0 million was recorded as an impairment of long-lived assets on the consolidated statements of operations and consisted of an $11.0 million impairment of operating lease right-of-use assets. See Note 6, Leases, in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report.Risks Related to our Products and OperationsIf our platform or services experience significant or repeated disruptions, outages, or failures due to defects, bugs, vulnerabilities, or similar software problems, or if we fail to determine the cause of any disruption or failure and correct it promptly, we could lose customers, become subject to service performance or warranty claims, or incur significant costs, reducing our revenue and adversely affecting our operating results.Our customers use our communications services to manage important aspects of their businesses, and any errors, defects, outages, or disruptions to our service or other performance problems with our service (such as those we have recently experienced and may encounter again), including those related to artificial intelligence technologies or dependencies on third-party services, could hurt our reputation and may damage our customers' businesses, any of which may result in our granting of credits to customers that in turn would reduce our revenue. Our services and the systems infrastructure underlying our cloud communications platform, including firewalls, switches and routers, incorporate software that is highly technical and complex. Our software and network infrastructure configurations have contained, and may now or in the future contain, undetected errors, bugs, or vulnerabilities, including those introduced by artificial intelligence-powered features. Such weaknesses could be exploited by hackers. These vulnerabilities include but are not limited to risks from ransomware, sophisticated nation-state attacks, and emerging malware threats. We continuously monitor these threats and update our defenses in response. Such weaknesses have also been the cause of, and may in the future cause, temporary service outages or other disruptions for some customers, potentially leading to significant financial and reputational damage. Our cybersecurity response plan includes incident response teams and system updates to mitigate these risks. Some errors in our software code may not be discovered until after the code has been released. Any errors, bugs, or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of customers, loss of revenue, or liability for service credits or damages, any of which could adversely affect our business and financial results. We implement bug fixes and upgrades as part of our regularly scheduled system maintenance, which may lead to system downtime. Even if we are able to implement the bug fixes and upgrades in a timely manner, any history of defects, reliance on vulnerable third-party services, or the loss, damage, or inadvertent release of confidential customer data, could cause our reputation to be harmed, and customers may elect not to purchase or renew their agreements with us and subject us to service performance credits, warranty claims or increased insurance costs. The costs associated with any material defects or errors in our software or other performance problems may be substantial and could materially adversely affect our operating results.18Our physical infrastructure is concentrated in a few facilities (i.e., data centers and public cloud providers), and any failure in our physical infrastructure or service outages could lead to significant costs and/or disruptions and could reduce our revenue, harm our business reputation and have a material adverse effect on our financial results.Our leased network and data centers, as well as public cloud infrastructure, are subject to various points of failure. Problems with cooling equipment, generators, uninterruptible power supply, routers, switches, or other equipment, whether or not within our control, often managed by third-party service providers, expose us to cybersecurity risks such as unauthorized access or data breaches. These incidents have led to recent service interruptions and may continue to do so. These incidents could result in further service interruptions for our customers as well as equipment damage, significantly impacting our operational capability and customer satisfaction. Our infrastructure is consolidated into a few large data center facilities distributed globally across different regions. Any failure or downtime in one of our data center facilities could affect a significant percentage of our customers. The total destruction, closure, or severe impairment of any of our data center facilities could result in significant downtime of our services and the loss of customer data. Because our ability to attract and retain customers depends on our ability to provide customers with highly reliable service, even minor interruptions in our service could harm our reputation. Additionally, in connection with the expansion or consolidation of our existing data center facilities from time to time, there is an increased risk that service interruptions may occur as a result of server relocation or other unforeseen construction-related issues.We have experienced interruptions in service in the past, including recent outages. The harm to our reputation is difficult to assess but has resulted and may result in the future in customer attrition. We have taken and continue to take steps to improve our infrastructure to prevent service interruptions, including upgrading our electrical and mechanical infrastructure. However, service interruptions continue to be a significant risk for us and could have a material adverse impact on our business.Any future service interruptions could:•cause our customers to seek service credits or damages for losses incurred;•require us to replace existing equipment or add redundant facilities;•affect our reputation as a reliable provider of communications services;•cause existing customers to cancel or elect to not renew their contracts; or•make it more difficult for us to attract new customers.We may be required to transfer our servers to new data center facilities or public cloud load to a different public cloud provider in the event that we are unable to renew our agreement or leases on acceptable terms, or at all, or the owners of the facilities decide to close their facilities, and we may incur significant costs and possible service interruption in connection with doing so. In addition, any financial difficulties, such as bankruptcy or foreclosure, faced by our third-party data center operators, or any of the service providers with which we or they contract, may have negative effects on our business, the nature and extent of which are difficult to predict. If our data centers or our public cloud providers are unable to keep up with our increasing needs for capacity, our ability to grow our business could be materially and adversely impacted.We may not be able to scale our business operations efficiently or quickly enough to meet our customers' growing needs, leading to increased customer churn and damage to reputation and brand, each of which could harm our operating results.As usage of our cloud software solutions by small business, mid-market and enterprise customers expands and as customers continue to integrate our services across their enterprises, we are required to devote additional resources to improving our application architecture, integrating our products and applications across our technology platform, integrating with third-party systems, and maintaining infrastructure performance. To the extent we increase our customer base and as our customers gain more experience with our services, the number of users and transactions managed by our services, the amount of data transferred, processed, and stored by us, the number of locations where our service is being accessed, and the volume of communications managed by our services have in some cases, and may in the future, expand rapidly. In addition, the reliance on and integration with artificial intelligence technologies and third-party services may increase operational complexities and dependencies, so we may need scale and modernize our internal business systems and our services organization, including customer support, sales operations, billing services, and regulatory, privacy and cybersecurity compliance, to serve our growing customer base. Further, any inability to manage or forecast the demands associated with such scalability, especially in the context of new or evolving data protection and privacy laws, or any other failure or delay in these efforts could cause impaired system performance and reduced customer satisfaction. These issues could adversely impact our reputation and brand and reduce the attractiveness of our cloud software solutions to customers, resulting in decreased sales to new customers, lower renewal rates by existing customers, and the issuance of service credits, or requested refunds, which could hurt our revenue growth and our reputation.Because our long-term growth strategy involves continued expansion outside the United States, our business will be susceptible to risks associated with international operations.An important component of our growth strategy involves the further expansion of our operations and customer base internationally. We have formed subsidiaries outside the United States, including a subsidiary in Romania that contributes significantly to our research and development efforts. Additionally, we have expanded into the United Kingdom, the EU, and Southeast Asia. The risks and challenges associated with sales and other operations outside the United States are different in 19some ways from those associated with our operations in the United States, and we have a limited history addressing those risks and meeting those challenges. Our current international operations and future initiatives, including Southeast Asia, will involve a variety of risks, including:•localization of our services, including translation into foreign languages and associated expenses;•regulation of our services as traditional telecommunications services, requiring us to obtain authorizations or licenses to operate in foreign jurisdictions, or alternatively preventing us from selling our full suite of services, or any services at all, in such jurisdictions;•changes in a specific country's or region's regulatory requirements, taxes, trade policies, tariffs, sanctions, trade laws, or political, or economic condition;•increased competition from regional and global cloud communications competitors in the various geographic markets in which we compete, where such markets may have different sales cycles, selling processes, and feature requirements, and may involve high levels of competition from local vendors that could require aggressive pricing strategies and adaptations to local market demands, which may limit our ability to compete effectively in different regions globally;•more stringent regulations relating to data security and the unauthorized use of, access to, and transfer of, commercial and personal information, particularly in the EU, and potentially conflicting privacy regulations that could complicate data management and compliance;•differing labor regulations, especially in the EU and Latin America, where labor laws are generally more advantageous to employees as compared to those in the United States, including deemed hourly wage and overtime regulations in these locations;•challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs;•difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems, which could delay or impede our ability to effectively launch our operations or scale them efficiently;•increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;•different pricing environments, longer sales cycles, longer accounts receivable payment cycles, and other collection difficulties;•currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future;•limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;•laws and business practices favoring local competitors or general preferences for local vendors;•limited or insufficient intellectual property protection;•political instability or terrorist activities, including the impact of geopolitical tensions in regions like Eastern Europe, the Middle East, and Asia, which could affect market stability and operations, or impact our employees located in those regions;•a military conflict with China and/or Russia or other geopolitical conflicts between nation-states, that will likely involve cyberattacks on critical infrastructure, including, but not limited to, global data centers, power grids, and communication companies;•exposure to liabilities under anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, trade and export laws such as those enforced by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury, and similar laws and regulations in other jurisdictions;•continuing uncertainty regarding social, political, immigration, and tax and trade policies in the United States and abroad, including as a result of the United Kingdom's withdrawal from the EU;•regional travel restrictions, business closures, government actions and other restrictions in connection with the geopolitical instabilities or pandemics; and•adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.We have limited experience in operating our business internationally, which increases the risk that any potential future expansion efforts that we may undertake will not be successful. We expect to invest substantial time and resources to expand our international operations. If we are unable to do this successfully and in a timely manner, our business and operating results could be materially adversely affected.The conflict between Russia and Ukraine and related sanctions, as well as other geopolitical conflicts, could negatively impact us.The ongoing conflict between Russia and Ukraine has led to and is expected to continue to lead to disruption, instability, and volatility in global markets and industries. Our business, including our operations in Romania, could be negatively impacted by such conflict. We have a significant engineering and operations presence in Romania, which borders Ukraine, and any expansion of the conflict between Russia and Ukraine to the countries surrounding Ukraine, including Romania, would negatively impact us and our employees in Romania. The United States government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, or by escalated tensions in the Middle East, particularly the ongoing conflict between Israel and Hamas and Israel and Iran that pose a particular 20risk given our partnerships with operations in Israel that may be adversely affected by those conflicts, could adversely affect our business, supply chain, partners, or customers, particularly if the impact were to cause a geographic expansion of the conflict between Russia and Ukraine to surrounding countries or intensify disruptions in the Middle East.We face risks related to acquisitions now and in the future that may divert our management's attention, result in dilution to our stockholders, and consume resources that are necessary to sustain and grow our existing business.Although we have acquired several companies and business units in recent years, including Fuze, we have limited experience with purchasing and integrating other businesses. We may not be able to identify suitable acquisition candidates in the future or negotiate and complete acquisitions on favorable terms.If appropriate opportunities present themselves, we may decide to acquire such companies or their products, technologies or assets. Acquisitions involve numerous risks, and there is no guarantee that we will ultimately strengthen our competitive position or achieve other benefits expected from the transaction. Among other risks we may encounter in connection with acquisitions:•we may experience difficulty and delays in integrating the products, technology platform, operations, systems and personnel of the acquired business with our own, particularly if the acquired business is outside of our core competencies;•we may not be able to manage the acquired business or the integration process effectively, which may limit our ability to realize the financial and strategic benefits we expected from the transaction;•the acquisition and integration may divert management’s attention from our day-to-day operations and disrupt the ordinary functioning of our ongoing business;•we may have difficulty establishing and maintaining appropriate governance, reporting relationships, policies, controls, and procedures for the acquired business, particularly if it is based in a country or region where we did not previously operate;•any failure to successfully manage the integration process may also adversely impact relationships with our employees, suppliers, customers, and business partners, or those of the acquired business, and may result in increased churn or the loss of key customers, business partners or employees for our business or those of the acquired business;•we may become subject to new or more stringent regulatory compliance obligations and costs by virtue of the acquisition, including risks related to international acquisitions that may operate in new jurisdictions or geographic areas where we may have no or limited experience;•we may become subject to litigation, investigations, proceedings, fines or penalties arising from or relating to the transaction or the acquired business, and any resulting liabilities may exceed our forecasts;•we may acquire businesses with different revenue models, customer concentration risks, and contractual relationships;•we may assume long-term contractual obligations, commitments or liabilities (for example, those relating to leased facilities), which could adversely impact our efforts to achieve and maintain profitability and impair our cash flow;•we may not successfully evaluate or utilize the acquired technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges;•the acquisition may create a drag on our overall revenue growth rate, which could lead analysts and investors to reduce their valuation of our company;•we may be exposed to existing cyber risks not identified prior to an acquisition that could impact our core operations until mitigated; and•if an acquired business’s cybersecurity controls are materially weaker than ours, we may be exposed to existing cyber risks not identified prior to an acquisition that could impact our core operations until mitigated.In addition, we may have to pay cash, incur debt, or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of our capital stock. The sale of equity to finance any such acquisitions could result in dilution to our stockholders. If we incur more debt, it would result in increased fixed obligations and could also subject us to covenants or other restrictions that would impede our ability to flexibly operate our business.As a result of these potential problems and risks, among others, businesses that we may acquire or invest in may not produce the revenue, competitive advantages, or business synergies that we anticipate, and the results and effects of any such acquisition may not be favorable enough to justify the amount of consideration we pay or the other investments we make in the acquired business.21If we do not or cannot maintain the compatibility of our communications and collaboration software with third-party applications and mobile platforms that our customers use in their businesses, our revenue could decline.The functionality and popularity of our cloud software solutions depends, in part, on our ability to integrate our services with third-party applications and platforms, including enterprise resource planning, customer relations management, human capital management, workforce management, and other proprietary application suites. Third-party providers of applications and application program interfaces may change the features of their applications and platforms, restrict our access to their applications and platforms or alter the terms governing use of their applications and application program interfaces and access to those applications and platforms in an adverse manner. Such changes could functionally limit or terminate our customers’ ability to use these third-party applications and platforms in conjunction with our services, which could negatively impact our offerings and harm our business. If we fail to integrate our software with new third-party back-end enterprise applications and platforms used by our customers, we may not be able to offer the functionality that our customers need, which would negatively impact our ability to generate revenue and adversely impact our business.Our services also allow our customers to use and manage our cloud software solutions on smartphones, tablets, and other mobile devices. As new smart devices and operating systems are released, we may encounter difficulties supporting these devices and services, and we may need to devote significant resources to the creation, support, and maintenance of our mobile applications. In addition, if we experience difficulties in the future integrating our mobile applications into smartphones, tablets, or other mobile devices or with certain communication platforms, such as Microsoft Teams, or if problems arise with our relationships with providers of mobile operating systems, such as those of Apple Inc. or Alphabet Inc., our future growth and our results of operations could suffer.To provide our services, we rely on third parties for our network service and connectivity, and any disruption or deterioration in the quality of these services or the increase in the costs we incur from these third parties could adversely affect our business, results of operations, and financial condition.We rely on third-party network service providers to originate and terminate substantially all of the public switched telephone network calls using our cloud-based services. We leverage the infrastructure of third-party network service providers to provide telephone numbers, public switched telephone network call termination and origination services, and local number portability for our customers, rather than deploying our own network throughout the United States and internationally. We use the infrastructure of third-party network service providers, such as Equinix, Inc. and CenturyLink, Inc., and public cloud providers, including Amazon Web Services, Inc. and Oracle Corporation, to provide our cloud services over their networks rather than deploying our own network connectivity. These decisions have resulted in lower capital and operating costs for our business in the short-term but have reduced our operating flexibility and ability to make timely service changes. If any of these network service providers cease operations or otherwise terminate the services that we depend on or become unwilling to supply cost-effective services to us in the future, the delay in switching our technology to another network service provider, if available, and qualifying this new service provider could have a material adverse effect on our business, financial condition, or operating results. In addition, the rates we pay to our network service providers and other intermediaries may also change more rapidly than the change in pricing we charge our customers, which may reduce our profitability and increase the retail price of our service. Furthermore, increased cybersecurity threats to infrastructure or heightened geopolitical tensions in regions where these third parties operate could exacerbate these risks, potentially leading to further operational disruptions and financial losses.We depend on third-party vendors for IP phones and certain software endpoints, and any delay or interruption in supply by these vendors would result in delayed or reduced shipments to our customers and may harm our business.We rely on third-party vendors for IP phones and software endpoints required to utilize our service. We currently do not have long-term supply contracts with any of these vendors. As a result, most of these third-party vendors are not obligated to provide products or services to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. The inability of these third-party vendors to deliver IP phones of acceptable quality and in a timely manner, particularly the sole source vendors, could adversely affect our operating results or cause them to fluctuate more than anticipated. Additionally, some of our products and services may require specialized or high-performance component parts that may not be available in quantities or in time frames that meet our requirements.Difficulty executing local number porting requests could negatively impact our business.The FCC and foreign regulators require Voice over Internet Protocol providers to support telephone number porting within specified timeframes. In order to port telephone numbers, we rely on third party telecommunications carriers to complete the process. Often, number ports take longer than the specified timeframes. For many potential customers, the ability to quickly port their existing telephone numbers into our service in a timely fashion is a very important consideration. To the extent that we cannot quickly port telephone numbers in, our ability to acquire new customers may be negatively impacted. To the extent that we cannot quickly port telephone numbers out when a customer leaves our service to go to another provider, we could be subject to regulatory enforcement action.22Risks Related to Regulatory MattersCyber intrusions, breaches of our networks or systems or those of our service and cloud storage providers, and other malicious acts could adversely impact our business.Our business operations, from our internal and service operations to research and development activities, sales and marketing efforts and customer and partner communications, depend on our ability to protect our network from interruption by damage from hackers, social engineering and phishing, ransomware, computer viruses, worms, other malicious software programs, including vulnerabilities in our network infrastructure such as firewalls, switches and routers, or similar disruptive problems or other events beyond our control. Individuals or entities have attempted, and will attempt, to penetrate our network security, and that of our platform, and try to cause harm to our business operations, including by misappropriating our proprietary information or that of our customers, employees and business partners or causing interruptions of our products and platform. In particular, cyberattacks and other malicious internet-based activity continue to increase in frequency and in magnitude both generally and specifically against us and other cloud-service providers. For example, during the second quarter of fiscal 2023, in real time, we detected an unauthorized third party in our network as well as the malware they deployed to establish persistent access. We responded quickly, including with the assistance of third party digital forensics experts, and implemented measures to identify and remove the intruder and malware from our network and secure our data before any potential ransomware could be deployed. We subsequently learned during the third quarter of fiscal 2023, in December 2022, that the unauthorized third party possessed approximately a terabyte of our confidential information from several back-office servers. The unauthorized third party made a ransom demand for the return of our confidential information, which we did not pay. We continue to implement new technological measures to prevent, detect, and contain such intrusions as well as build and strengthen ongoing employee awareness, education and training, but we cannot guarantee we will be able to prevent, detect or contain all future cyber intrusions, nor can we guarantee that our backup systems, regular data backups, security protocols, denial or disruption of service (DDoS) mitigation, and other procedures that are currently in place, or may be in place in the future, will be adequate to prevent significant damage, system failure, or data loss.Inherent in our provision of services are the storage, processing, and transmission of our customers' data, which may include confidential and sensitive information and that confidential or sensitive information may be stored or transmitted by means not designed for confidential or sensitive information, such as the processing or storing of protected health information or payment card information in free-form text fields provided for other purposes. This exposes us to significant cybersecurity risks, including data breaches and unauthorized data access, which could compromise customer trust and subject us to financial and legal penalties. Customers may use our services to store, process, and transmit a wide variety of confidential and sensitive information, such as credit card, bank account, and other financial information, proprietary information, trade secrets, or other data that may be protected by sector-specific laws and regulations, like intellectual property laws, laws addressing the protection of personally identifiable information (or personal data in the EU), as well as the Federal Communications Commission’s, or the FCC’s, customer proprietary network information, or CPNI, rules. We also face the risk of changes in cybersecurity laws and regulations which could impose additional compliance costs or challenges. Additionally, we closely monitor legislative developments to swiftly adapt our practices, ensuring ongoing compliance and protection against emerging threats. We may be targets of cyber threats and security breaches, given the nature of the information that we store, process, and transmit and the fact that we provide communications services to a broad range of businesses. To the extent that state-sponsored incidents of cybersecurity breaches increase due to geopolitical tensions, this risk may continue to increase.In addition, we use third-party vendors, which in some cases have access to our data and our customers' data. Despite the implementation of security measures by us or our vendors, our computing devices, infrastructure, or networks, or our vendors' computing devices, infrastructure, or networks may be vulnerable to hackers, social engineering and phishing, ransomware, computer viruses, worms, other malicious software programs, or similar disruptive problems due to a security vulnerability in our or our vendors' infrastructure or network, or our vendors, customers, employees, business partners, consultants, or other internet users who attempt to invade our or our vendors' public and private computers, tablets, mobile devices, software, data networks, or voice networks. If there is a security vulnerability in our or our vendors' infrastructure or networks that is successfully targeted, we could face increased costs, liability claims, government investigations, fines, penalties or forfeitures, class action litigation, reduced revenue, or harm to our reputation or competitive position.We could be liable for breaches of security on our website, fraudulent, improper or illegal activities by our users, or the failure of third-party vendors to deliver credit card transaction processing services, which could result in claims, increase the cost of operations or otherwise harm our business and reputation.A fundamental requirement for operating an Internet-based, worldwide cloud software solution and electronically billing our customers is the secure transmission of confidential information and media over public networks. Although we have developed systems and processes that are designed to protect consumer information and prevent fraudulent credit card transactions and other security breaches, failure to mitigate such fraud or breaches may subject us to costly breach notification and other mitigation obligations, class action lawsuits, investigations, fines, forfeitures or penalties from governmental agencies that could adversely affect our operating results.23The law relating to the liability of providers of online payment services is currently unsettled and states may enact their own rules with which we may not comply. We rely on third-party providers to process and guarantee payments made by our subscribers up to certain limits, and we may be unable to prevent our customers from fraudulently receiving goods and services. Our liability risk will increase if a larger fraction of transactions affected using our cloud-based services involves fraudulent or disputed credit card transactions.We may also experience losses due to subscriber fraud and theft of service. Subscribers have, in the past, obtained access to our service without paying for monthly service and international toll calls by unlawfully using our authorization codes or by submitting fraudulent credit card information. If our existing anti-fraud procedures are not adequate or effective, consumer fraud and theft of service could have a material adverse effect on our business, financial condition, and operating results.Similarly, bad actors may use our products to promote their goals and encourage users to engage in improper or illegal activities. There have been instances where improper or illegal content may have been shared on our platform without our knowledge. As a service provider, and as a matter of policy, we do not monitor user meetings. Our terms of service prohibit such conduct. While to date we have not been subject to legal or administrative actions as a result of improper or illegal content, the laws in this area are currently in a state of flux and vary widely between jurisdictions. Accordingly, it may be possible that in the future, we and our competitors may be subject to legal actions along with the users who shared such content. In addition, regardless of any legal liability we may face, if there is an incident generating extensive negative publicity about the content shared on our platform, our business and reputation could be harmed.Failure to comply with laws and contractual obligations related to data privacy and protection could have a material adverse effect on our business, financial condition and operating results.We process many types of data, including personal data in the course of our business. As such, we are subject to the data privacy and protection laws and regulations adopted by federal, state and foreign governmental agencies, including the EU's GDPR, the UK’s Data Protection Act 2018, the CCPA/CPRA, and the Virginia Consumer Data Protection Act. Data privacy and protection is highly regulated in many jurisdictions and may become the subject of additional regulation in the future. For example, lawmakers and regulators worldwide are considering proposals that would require companies, like us, that encrypt users' data to ensure access to such data by law enforcement authorities. In addition, several additional states have comprehensive privacy laws that will become effective in 2024 or later, including Delaware, Indiana, Iowa, Montana, New Jersey, Oregon, Tennessee and Texas. Privacy laws restrict our processing of personal information, provided to us by our customers as well as data we collect from our customers and employees. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data protection. However, if we fail to comply, we may be subject to fines, penalties and lawsuits, statutory damages at both the federal and state levels in the United States, substantial fines and penalties under the EU’s GDPR and the UK’s Data Protection Act 2018, and class action lawsuits, and our reputation may suffer. We may also be required to make modifications to our data practices that could have an adverse impact on our business, including increasing our operating costs, which may cause us to increase our prices, making our services less competitive.We are also subject to the privacy and data protection-related obligations in our contracts with our customers and other third parties. Any failure, or perceived failure, by us to comply with federal, state, or international laws, including laws and regulations regulating privacy, data, or consumer protection, or to comply with our contractual obligations related to privacy, could result in proceedings or actions against us by governmental entities, contractual parties, or others, which could result in significant liability to us, as well as harm our reputation. Additionally, third parties on which we rely enter into contracts to protect and safeguard our customers' data. Should such parties violate these agreements or suffer a breach, we could be subject to proceedings or actions against us by governmental entities, contractual parties, or others, which could result in significant liability to us as well as harm to our reputation.Our products and services must comply with industry standards, FCC regulations, state, local, country-specific, and international regulations, and changes may require us to modify existing services, potentially increase our costs or prices we charge customers, and otherwise harm our business.As a provider of interconnected Voice over Internet Protocol services, we are subject to various international, federal, state, and local requirements applicable to our industry, including those that address, among other matters, acceptable marketing practices, the accessibility of 9-1-1 or other international emergency services, local number porting, robo-calling, and caller ID spoofing. The failure of our products and services to comply, or delays in compliance, with various existing and evolving standards could delay or interrupt our introduction of new products, subject us to fines or other imposed penalties, or harm our reputation, any of which would have a material adverse effect on our business, financial condition, or operating results.Regulations to which we may be subject address the following matters, among others:•license requirements that apply to providers of communications services in many jurisdictions;•our obligation to contribute to various Universal Service Fund programs, including at the state level;•monitoring on rural call completion rates;•safeguarding and use of customer proprietary network information;•rules concerning access requirements for users with disabilities;•our obligation to offer 7-1-1 abbreviated dialing for access to relay services;24•compliance with the requirements of United States and foreign law enforcement agencies, including the Communications Assistance for Law Enforcement Act, and cooperation with local authorities in conducting wiretaps, pen traps and other surveillance activities;•the ability to dial 9-1-1 (or corresponding numbers in regions outside the United States), auto-locate E-911 calls (or corresponding equivalents) when required, and access emergency services;•the transmission of telephone numbers associated with calling parties between carriers and service providers like us;•regulations governing outbound dialing, including the Telephone Consumer Protection Act;•FCC and other regulators efforts to combat robo-calling and caller ID spoofing;•compliance with data protection regulations such as the GDPR in Europe, which impose stringent requirements on data privacy and security;•compliance with the Telecommunications (Security) Act 2021 in the UK, which imposes strict security requirements on telecom providers to protect the UK's telecoms network from cyber threats and vulnerabilities. Non-compliance with this act could result in significant penalties and affect our ability to operate in the UK; and•adherence to environmental regulations concerning the disposal and recycling of electronic products and batteries, which are becoming increasingly relevant as we expand our hardware offerings.Regulation of our services as telecommunications services may require us to obtain authorizations or licenses to operate in foreign jurisdictions and comply with legal requirements applicable to traditional telephony providers. This regulation may impact our ability to differentiate ourselves from incumbent service providers and imposes substantial compliance costs on us. In addition, the reform of federal and state Universal Service Fund programs and payment of regulatory and other fees in international markets could increase the cost of our service to our customers, diminishing or eliminating any pricing advantage we may have.Risks Related to Intellectual PropertyIf we are found to be infringing on a third party's proprietary technology, our business could be disrupted.If we are found to be infringing the intellectual property rights of any third-party in lawsuits or proceedings that may be asserted against us, we could be subject to monetary liabilities for such infringement, which could be material. We could also be required to refrain from using, manufacturing, or selling certain products or using certain processes, either of which could have a material adverse effect on our business and operating results. Our broad range of current and former technology, including IP telephony systems, digital and analog circuits, software, and semiconductors, increases the likelihood that third parties may claim infringement by us of their intellectual property rights. We have received and may continue to receive in the future, notices of claims of infringement, misappropriation, or misuse of other parties' proprietary rights. There can be no assurance that we will prevail in these discussions and actions or that other actions alleging infringement by us of third-party patents will not be asserted or prosecuted against us. Furthermore, lawsuits like these may require significant time and expense to defend, may divert management's attention away from other aspects of our operations and, upon resolution, may have a material adverse effect on our business, results of operations, financial condition, and cash flows.Inability to protect our proprietary technology would disrupt our business.We rely, in part, on patent, trademark, copyright, and trade secret law to protect our intellectual property in the United States and abroad. We seek to protect our software, documentation, and other written materials under trade secret and copyright law, which afford only limited protection. We currently have several United States patent applications pending. We cannot predict whether such pending patent applications will result in issued patents, and if they do, whether such patents will effectively protect our intellectual property. The intellectual property rights we obtain may not be sufficient to provide us with a competitive advantage, and could be challenged, invalidated, infringed, or misappropriated. To address these risks, we also rely on confidentiality agreements with our employees, consultants, and contractors; however, these agreements may be breached, may not be enforceable in every instance, and may not provide an adequate remedy if unauthorized use or disclosure of our information occurs.We may not be able to protect our proprietary rights in the United States or internationally (where effective intellectual property protection may be unavailable or limited), and competitors may independently develop technologies that are similar or superior to our technology, duplicate our technology or design around any patent of ours.Litigation may be necessary in the future to enforce our intellectual property rights, determine the validity and scope of our proprietary rights or the rights of others, or defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of management time and resources and could have a material adverse effect on our business, financial condition, and operating results. Any settlement or adverse determination in such litigation would also subject us to significant liability. Further, in some jurisdictions we may not be able to pursue litigation effectively due to barriers inherent in foreign legal systems or customs.25Our inability to use software licensed from third parties, or our use of open-source software under license terms that interfere with our proprietary rights, could disrupt our business.Our technology platform incorporates software licensed from third parties, including some software, known as open-source software, which we use without charge. Although we monitor our use of open source software, the terms of many open source licenses to which we are subject have not been interpreted by United States or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our platform to our customers. In the future, we could be required to seek licenses from third parties in order to continue offering our platform, which licenses may not be available on terms that are acceptable to us, or at all. Alternatively, we may need to re-engineer our platform or discontinue use of portions of the functionality provided by our platform. In addition, the terms of open-source software licenses may require us to provide software that we develop using such software to others on unfavorable license terms. This could potentially expose proprietary features of our platform to competitors, thereby eroding our competitive edge. Our inability to use third-party software could result in disruptions to our business, or delays in the development of future offerings or enhancements of existing offerings, which could impair our business.Risks Related to our Debt, our Stock, and our CharterWe have a substantial amount of indebtedness, which could have important consequences to our business.We have a substantial amount of indebtedness. During the second quarter of fiscal 2023, we entered into the following arrangements: (i) on August 10, 2022, we borrowed $250.0 million, (of which $225.0 million remains outstanding following a $25.0 million debt pay-down in June 2023) in a senior secured term loan facility (the “Term Loan”) under the Credit Agreement entered into on August 3, 2022, which term loans will mature on August 3, 2027 and initially bear interest at an annual rate equal to the Standard Overnight Financing Rate, or SOFR, (which will be subject to a floor of 1.00% and a credit spread adjustment of 0.10%), plus a margin of 6.50%; and (ii) on August 11, 2022, we issued approximately $201.9 million aggregate principal amount of 4.00% convertible senior notes due February 1, 2028 (the “2028 Notes”), which bear interest at a rate of 4.00% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing on February 1, 2023, and will mature on February 1, 2028, unless earlier converted, redeemed or repurchased, pursuant to the indenture for the 2028 Notes.Our substantial indebtedness could have important consequences that could have a material adverse effect on our business, financial condition and results of operations, including the following:•requiring us to comply with restrictive covenants in our senior secured debt facility, which limits the manner in which we conduct our business, and which obligations under the Credit Agreement are guaranteed by our wholly-owned subsidiaries. For example, our Credit Agreement contains a minimum adjusted cash Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) financial covenant, a minimum liquidity covenant and a maximum secured leverage ratio financial covenant and contains affirmative and negative covenants customary for transactions of this type, including limitations with respect to indebtedness, liens, investments, dividends, disposition of assets, change in business, and transactions with affiliates;•making it more difficult for us to satisfy our obligations with respect to our indebtedness;•requiring us to dedicate a substantial portion of our cash flow from operations to debt service payments on our debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes;•limiting our flexibility in planning for, or reacting to, changes in the industry in which we operate;•placing us at a competitive disadvantage compared to any of our less-leveraged competitors;•increasing our vulnerability to both general and industry-specific adverse economic conditions;•potentially complicating our ability to refinance our debt under favorable conditions, or at all, which could further restrict our operational flexibility and increase our financing costs;•increasing our vulnerability to fluctuations in interest rates, particularly for any variable-rate debt; and•limiting our ability to obtain additional debt or equity financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing.Servicing our debt, including the paying down of principal, requires the use of cash and liquidity of our clearing, cash management and custodial financial institutions, and we may not have sufficient cash flow from our business to pay down our debt.As of March 31, 2024, we currently have approximately $201.9 million aggregate principal amount of the 2028 Notes and the $225.0 million Term Loan outstanding.Our ability to make scheduled payments of the principal of, pay interest on, or refinance our indebtedness, including the amounts payable under the 2028 Notes and the Term Loan, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control, such as recent and potential future disruptions in access to bank deposits or lending commitments due to bank failure, as well as in the event of sustained deterioration in the liquidity, or failure, of our clearing, cash management and custodial financial institutions. The volatility of the global economy, changes in the credit market conditions, and fluctuations in interest rates could further complicate our ability to refinance our debt. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt, including paying off the principal when due, and make necessary capital expenditures. Our notes are currently significantly out of the money, and our stock price would 26have to increase significantly for our notes to convert prior to maturity. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may also face heightened regulatory scrutiny or changes in financial regulation which could impact our refinancing options. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.We may not have the ability to raise the funds necessary to settle conversions of the new notes in cash or repurchase the new notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the new notes.Holders of the 2028 Notes have the right to require us to repurchase the 2028 Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the 2028 Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2028 Notes being converted. However, due to potential adverse market conditions or changes in the credit markets, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the new Notes surrendered therefor or the new Notes being converted. In addition, our ability to repurchase the 2028 Notes or to pay cash upon conversions of the 2028 Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. If one or more holders elect to convert their notes, we may face increased financial pressure, especially if this occurs during a period of liquidity constraints within the broader financial system. The potential impact of a banking system failure could exacerbate our liquidity risks, as we rely on these institutions not only for operating cash but also for the facilitation of our debt service payments. Our failure to repurchase any of our Notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of our Notes as required by the applicable indenture would constitute a default under such indenture. A default under an applicable indenture or the occurrence of the fundamental change may also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase our 2028 Notes or make cash payments upon conversions thereof.The conditional conversion feature of our notes, if triggered, may adversely affect our financial condition and operating results.In the event the conditional conversion feature of our notes is triggered, holders of our notes will be entitled to convert such notes at any time during specified periods at their option. If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligations through the payment of cash, which could adversely affect our liquidity. This could also place significant pressure on our cash reserves, particularly if market conditions or our operating results are not favorable at the time of conversion. In addition, even if holders of our notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such notes as a current rather than long-term liability, which would result in a material reduction of our net working capital. This reclassification could severely impact our financial ratios and may affect our ability to meet financial obligations or secure new financing under favorable terms.Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results.U.S. GAAP is subject to interpretation by the FASB, the Securities and Exchange Commission and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting standards or practices can have a significant effect on our reported results. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and will occur in the future. Changes to existing rules or the questioning of current practices may lead to increased compliance costs and necessitate the engagement of additional financial and legal advisors or harm our reported financial results or the way we account for or conduct our business. Furthermore, such changes could affect our compliance with loan covenants or other financial obligations, potentially affecting our borrowing capacity or the perceptions of our financial stability by investors and creditors. Moreover, these changes could complicate our efforts to comply with covenants in our debt agreements or affect our compliance with regulatory requirements, further influencing our financial stability.The instability in the banking system in recent years could adversely impact our operations and operating results, including our cash and cash equivalents if the financial institutions in which we hold our cash and cash equivalents fail.On March 10, 2023, the Federal Deposit Insurance Corporation, or FDIC, announced that Silicon Valley Bank had been closed by the California Department of Financial Protection and Innovation; on March 12, 2023, Signature Bank was closed by the New York State Department of Financial Services; and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the California Department of Financial Protection and Innovation. We maintain cash balances at financial institutions which may be in excess of the Federal Deposit Insurance Corporation insurance limit. Additionally, the broader implications of these bank failures could disrupt our ability to access other forms of liquidity, such as lines of credit, and might tighten credit conditions, affecting our ability to secure financing on favorable terms. Any failure of a depository institution to return any of our deposits, or 27any other adverse conditions in the financial or credit markets affecting depository institutions, could impact access to our invested cash or cash equivalents and could adversely impact our operations, liquidity and operating results. This could also potentially increase our cost of capital and affect our investment decisions. The broader repercussions of such banking failures may include increased market volatility, reduced consumer confidence, and tightened credit conditions, which could further strain our operational funding and credit availability. These conditions might also influence our ability to maintain necessary liquidity reserves or to finance ongoing operations and strategic initiatives effectively.Future sales of our common stock or equity-linked securities in the public market could lower the market price of our common stock.In the future, we may sell additional shares of our common stock or equity-linked securities to raise capital. In addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options, upon the vesting and settlement of restricted stock units and performance units, stock purchases in connection with our Employee Stock Purchase Plan, and upon conversion of our notes. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. This uncertainty may lead to increased volatility in our share price as investors speculate on the timing and impact of these issuances. The issuance and sale of substantial amounts of common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of our notes and the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities. Additionally, any dilutive effect of such issuances might decrease the earnings per share and ownership interests of existing shareholders, potentially leading to further downward pressure on our stock price.Certain provisions in our charter documents and Delaware law could discourage takeover attempts.Our restated certificate of incorporation and amended and restated by-laws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors, including, among other things:•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;•the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;•the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;•the requirement that a special meeting of stockholders may be called only by a majority vote of our board of directors or by stockholders holdings share of our common stock representing in the aggregate a majority of votes then outstanding, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;•the ability of our board of directors, by majority vote, to amend our by-laws, which may allow our board of directors to take additional actions to prevent a hostile acquisition and inhibit the ability of an acquirer to amend our by-laws to facilitate a hostile acquisition; and•advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us.These provisions might result in our stock trading at a lower price due to perceptions of decreased acquisition potential.We are also subject to certain anti-takeover provisions under the General Corporation Law of the State of Delaware (the "DGCL"). Under Section 203 of the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or (a) our board of directors approves the transaction prior to the stockholder acquiring the 15% ownership position, (b) upon consummation of the transaction that resulted in the stockholder acquiring the 15% ownership position, the stockholder owns at least 85% of the outstanding voting stock (excluding shares owned by directors or officers and shares owned by certain employee stock plans) or (c) the transaction is approved by the board of directors and by the stockholders at an annual or special meeting by a vote of 66 2/3% of the outstanding voting stock (excluding shares held or controlled by the interested stockholder). These provisions in our restated certificate of incorporation and amended and restated by-laws and under Delaware law could discourage potential takeover attempts, potentially reducing liquidity for our shareholders.28General Risk FactorsCurrent and future variants of COVID-19 and any economic difficulty they trigger could significantly harm our business.The global spread of COVID-19 and its variants has created significant volatility, uncertainty, and economic disruption in the recent past, particularly for small- and mid-sized businesses. Many of our existing and prospective customers have experienced or could experience economic hardship caused by current and future variants of COVID-19. This could reduce the demand for our cloud services, delay and lengthen sales cycles, increase customer churn, force us to lower the prices for our services and/or provide customers with service credits, and lead to slower growth or even a decline in our revenue, operating results, and cash flows. The ongoing impact of COVID-19 on future demand for our services depends on numerous evolving factors, including: the duration and extent of the global spread of current and future COVID-19 variants; governmental, business, and individual actions that have been and continue to be taken in response to the current and future COVID-19 variants in different countries globally; the rate of vaccinations globally and the efficacy of available vaccines on current and future variants of the virus; the effect on our customers and customer demand and their ability to pay for our services; disruptions to third-party data centers and Internet service providers; and any decline in the quality and/or availability of our services. It is important to note that the shifting landscape of remote versus in-person work models could significantly alter demand patterns for our offerings, including the possibility that as businesses return to in-person work, the demand for some of our products could decline.The ongoing impact of COVID-19 on macroeconomic conditions has at some periods also impacted the functioning of financial and capital markets, foreign currency exchange rates, and interest rates. Even after the COVID-19 pandemic has subsided, we may experience an adverse impact to our business as a result of COVID-19's global economic impact, including any recession that has occurred or may occur in the future, and we may need to access the capital markets at an unfavorable time. If we need to access the capital markets, we face the risk of market volatility which may severely limit our ability to raise capital and there can be no assurance that financing may be available on attractive terms, if at all.We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs.We may need to pursue financing in the future to make expenditures or investments to support the growth of our business (whether through acquisitions or otherwise) and may require additional capital to pursue our business objectives, respond to new competitive pressures, service our debt, and pay extraordinary expenses such as litigation settlements or judgments or fund growth, including through acquisitions, among other potential uses. Additional funds, however, may not be available when we need them on terms that are acceptable to us, or at all. We also face certain risks in the event of a sustained deterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity, or failure, of our clearing, cash management and custodial financial institutions. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow and support our business and to respond to business challenges could be significantly limited.Natural disasters, war, terrorist attacks, global pandemics, or malicious conduct, among other unforeseen events, could adversely impact our operations, could degrade or impede our ability to offer services, and may negatively impact our financial condition, revenue, and costs going forward.Our cloud communications services rely on uninterrupted connection to the Internet through data centers and networks. Any interruption or disruption to our network, or the third parties on which we rely, could adversely impact our ability to provide service. Our network could be disrupted by circumstances outside of our control, including natural disasters, acts of war, terrorist attacks, global pandemics or malicious acts, among other unforeseen events, including, but not limited to, cyberattacks. For example, our headquarters, global networks operations center, and one of our third-party data center facilities are located in the San Francisco Bay Area, a region known for seismic activity. Also, global pandemics, such as the one caused by COVID-19, may restrict travel by personnel, reduce the availability of materials required to maintain data centers that support our cloud communication services, and could require us or our partner data centers and Internet service providers to curtail operations in certain geographic regions. Such an event may also impede our customers' connections to our network, since these connections also occur over the Internet, and would be perceived by our customers as an interruption of our services, even though such interruption would be beyond our control. The prolonged nature of such disruptions could also strain our operational resilience, affect employee productivity, particularly in regions heavily impacted by these disruptions, and might force a reassessment of our current operational and disaster recovery plans. Increased operational costs and changes in consumer behavior due to such events could further result in long-term shifts in our market and operational strategy. Any of these events could have a material adverse impact on our business, causing us to incur significant expenses, lose substantial amounts of revenue, suffer damage to our reputation, and lose customers.29ITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 1C. CYBERSECURITY8x8 recognizes the critical importance of cybersecurity in maintaining the integrity, confidentiality, and availability of its systems and data. As a leading provider of communication and collaboration solutions, 8x8 is committed to safeguarding its assets, including customer data, from evolving cybersecurity threats.NIST Framework Adoption:8x8's cybersecurity program is aligned with the National Institute of Standards and Technology, or NIST, cybersecurity framework, a widely recognized set of guidelines for managing and mitigating cybersecurity risks. By leveraging the National Institute of Standards and Technology framework, 8x8 has implemented a comprehensive and structured approach to identifying, protecting, detecting, responding to, and recovering from cybersecurity incidents.Governance Structure:At 8x8, cybersecurity is integral to the enterprise-wide risk management program. The Chief Information Security Officer, or CISO holds a pivotal role in overseeing the Company's cybersecurity initiatives. The Company's Chief Information Security Officer has served in various security leadership roles, including at a Fortune 500 technology company, and is a Certified Information System Security Professional, or CISSP, and a Licensed Private Investigator, and completed Harvard University's Cybersecurity Managing Risk in 2021. He also held a United States Top Secret / Sensitive Compartmentalized Information, or TS/SCI, security clearance when he advised the White House, Pentagon, National Security Agency, Central Intelligence Agency, and Federal Bureau of Investigation on classified projects. Reporting directly to the Chief Legal Officer, who in turn reports to the CEO, the Chief Information Security Officer is empowered to lead the Executive Risk Management Committee. Through this committee, critical cybersecurity issues are monitored, addressed, and escalated as necessary.Furthermore, the Chief Information Security Officer provides regular updates and presentations directly to the Board of Directors on cybersecurity matters. This direct line of communication ensures that the Board remains informed and engaged in understanding and managing cybersecurity risks facing the Company.To enhance oversight and governance in this area, 8x8's Board of Directors has established the Technology & Cybersecurity Committee. This committee focuses specifically on the Company's technology, products, and cybersecurity program, providing strategic guidance and oversight to ensure alignment with business objectives and industry standard practices.Reporting and Communication:Transparent reporting and communication are key components of 8x8's cybersecurity program. Incidents are promptly reported to the Chief Information Security Officer, who is responsible for escalating to relevant stakeholders, including executive leadership, the internal disclosure committee, and the Board of Directors, as required. Regular communication channels ensure that stakeholders are kept informed of the Company's cybersecurity posture and any emerging threats or incidents.Determining Potential Impact and Materiality of Cybersecurity Incidents:8x8 conducts thorough assessments to determine the potential impact and materiality of cybersecurity incidents. 8x8’s Chief Information Security Officer is a member of 8x8’s internal disclosure committee emphasizing the importance of cybersecurity as part of 8x8’s disclosure controls and procedures. By evaluating factors such as the nature of the incident, the extent of data exposure, and potential regulatory implications, the Company assesses the significance of cybersecurity events, which helps it take appropriate measures to mitigate risks, minimize impact and properly report any material cybersecurity incidents. Incident Response Plan (IRP) Implementation:8x8 has developed and implemented a comprehensive Incident Response Plan, or IRP, to effectively manage cybersecurity incidents. The Incident Response Plan outlines clear reporting and escalation processes, delineating roles and responsibilities for incident response team members. The plan is regularly reviewed, tested, and updated to facilitate its effectiveness in mitigating and responding to cybersecurity threats promptly.Integration with Overall Risk Management Program:The cybersecurity program at 8x8 is fully integrated with the Company's overall risk management program through our Chief Information Security Officer's participation in such governance structures as the executive risk management committee, data protection committee, and internal disclosure committee and the incorporation of security in the Company’s overall compliance and enterprise risk management programs. By aligning cybersecurity initiatives with 8x8’s broader enterprise risk management initiatives, 8x8 pursues a holistic approach to identifying, assessing, and mitigating risks across the organization.30Risk Assessment and Identification:8x8 conducts regular risk assessments to identify and prioritize cybersecurity risks. Through measures such as vulnerability assessments, and penetration testing, the Company identifies potential vulnerabilities and takes proactive steps to address them. 8x8 has also implemented technical, administrative and legal controls to manage our risk from third party service providers, including implementation of a third-party vendor risk management platform. Individuals or entities have attempted, and will continue to attempt, to penetrate our network security, and that of our platform, to try to cause harm to our business operations, including by misappropriating our proprietary information or that of our customers, employees and business partners or causing interruptions of our products and platform. See the sections entitled "Risks Related to our Products and Operations" and "Risks Related to Regulatory Matters" in Part I, Item 1A "Risk Factors" for more information on our cybersecurity risks.Training and Awareness:8x8 invests in comprehensive training and awareness programs to educate employees about cybersecurity best practices and their roles in safeguarding company assets. By promoting a culture of cybersecurity awareness, 8x8 strengthens its overall security posture and reduces the risk of human error leading to cybersecurity incidents.Engagement with Third Parties:8x8 collaborates with third-party auditors, consultants, and participates in bug bounty programs to enhance its cybersecurity capabilities. External audits and assessments provide independent validation of the effectiveness of 8x8’s cybersecurity controls, while bug bounty programs leverage the collective expertise of the cybersecurity community to identify and address potential vulnerabilities.Conclusion:8x8 prioritizes cybersecurity as a fundamental aspect of its operations and is dedicated to maintaining a robust cybersecurity program aligned with industry practices and regulatory standards. Through strong governance, risk management, and continuous improvement efforts, 8x8 aims to protect its systems, data, and stakeholders from cybersecurity risks.ITEM 2. PROPERTIESOur principal operations are located in Campbell, California. Outside the United States, our operations are conducted primarily in leased office space located in the United Kingdom (primarily used for sales and customer support in Europe), Romania (primarily used for customer support, and research and development), Canada (primarily used for research and development), Portugal (primarily used for research and development), Singapore (primarily used for regional sales and marketing, procurement, customer support, and communications platform as-a-service), and Philippines (primarily used research and development and customer support).In addition, we lease space from third-party data center hosting facilities under co-location agreements in the United States, Europe, and the Asia Pacific region.For additional information regarding our obligations under leases, see Note 6, Leases, in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report.ITEM 3. LEGAL PROCEEDINGSInformation with respect to this item may be found in Note 7, Commitments and Contingencies in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report, under “Legal Proceedings”, which is incorporated herein by reference.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.31PART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket Information for Common StockSince November 15, 2022, our common stock has been traded under the symbol "EGHT" and is listed on the Nasdaq Global Select Market of the Nasdaq Stock Market national securities exchange. Previously, from December 8, 2017 to November 14, 2022, our common stock traded under the symbol "EGHT" and was listed on the New York Stock Exchange, or the “NYSE.”Dividend PolicyWe have never paid cash dividends on our common stock and have no plans to do so in the foreseeable future.Number of Common StockholdersAs of May 8, 2024, there were approximately 279 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.See Item 12 of Part III of this Annual Report regarding information about securities authorized for issuance under our equity compensation plans.Stock Performance GraphNotwithstanding any statement to the contrary in any of our previous or future filings with the Securities and Exchange Commission the following information relating to the price performance of 8x8’s common stock shall not be deemed "filed" with the Securities and Exchange Commission or "soliciting material" under the Exchange Act and shall not be incorporated by reference into any such filings.The graph below shows the cumulative total stockholder return over a five-year period, assuming the investment of $100 on March 31, 2019 in each of 8x8's common stock, the Nasdaq Composite Index, the New York Stock Exchange Composite Index, the Russell 2000 Index, and the Nasdaq Telecommunications Index. The graph is furnished, not filed, and the historical return cannot be indicative of future performance. The New York Stock Exchange Composite Index was added to the graph below because 8x8 changed the listing of its common stock to the NYSE from the Nasdaq in November 2022. In accordance with Securities and Exchange Commission rules, the performance graph presents both the indices used in the previous year and the newly selected index.32March 31,2019202020212022202320248x8, Inc.$100.00 $68.61 $160.59 $62.33 $20.64 $13.37 Russell 2000100.00 74.89 144.21 134.45 117.06 137.98 NASDAQ Composite100.00 99.62 171.38 183.98 158.12 211.91 NASDAQ Telecommunications100.00 83.39 117.69 109.84 96.48 97.49 NYSE Composite100.00 81.14 122.88 131.30 121.09 144.23 Issuer Issuances and Purchases of Equity SecuritiesRepurchasesIn August 2022, the Company repurchased in privately negotiated transactions with a limited number of holders 10,695,000 shares of its common stock for approximately $60.0 million, in connection with the Exchange Transaction and negotiation of the secured term loan facility, as further described in Part II, Item 8, Note 8, Convertible Senior Notes and Term Loan.There was no activity under the 2017 Repurchase Plan for the year ended March 31, 2024. The value of shares that may yet be purchased under the 2017 Repurchase Plan is approximately $7.1 million.IssuancesOn August 3, 2022, the Company agreed with its financial advisor, J. Wood Capital Advisors LLC, to settle 50% of its financial advisory fee for services provided in connection with the Exchange Transaction and negotiation of the secured term loan facility, as further described in Part II, Item 8, Note 8, Convertible Senior Notes and Term Loan, to the consolidated financial statements through the issuance of 1,015,024 shares of the Company's common stock, equivalent to approximately $5.1 million. These shares were issued in a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act. The Company relied on this exemption based in part on representations made by the financial advisor in its engagement letter and related share payment letter.ITEM 6. [Reserved]33ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other information included elsewhere in this Annual Report. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.This section discusses items pertaining to and comparisons of financial results between fiscal 2024 and fiscal 2023. A discussion of fiscal 2023 items and comparisons between fiscal 2023 and fiscal 2022 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (the “2023 MD&A”), filed with the Securities and Exchange Commission on May 25, 2023.OVERVIEWWe are a leading provider of software-as-a-service solutions for contact center, voice communications, video meetings, employee collaboration, and embeddable communication application program interfaces. Our solutions empower workforces worldwide by connecting individuals and teams so they can collaborate faster, work smarter, and better serve customers, from any location. The communications capabilities and advanced artificial intelligence/machine learning technologies of our contact center, communication and collaboration solutions are integrated into a comprehensive cloud-based offering powered by our global communications platform, which together comprise our 8x8 XCaaS platform solution. The XCaaS platform delivers our unified communications as-a-service, contact center as-a-service, and communications platform as-a-service services and includes artificial intelligence-driven digital assistance, intuitive user interfaces, and real-time business analytics and intelligence, enabling organizations of all sizes to design, deploy and adapt tailored communications and workflows for differentiated employee and customer experiences. The 8x8 XCaaS platform offers a cloud technology stack for communication, collaboration, and customer interaction. It delivers the security, scalability, high availability, and ease-of-use of a modern cloud-based architecture while masking the complexity of a global communications infrastructure. A comprehensive data layer across the platform powers 8x8 artificial intelligence/machine learning algorithms, as well as vertical-specific and purpose-built applications from our ecosystem of technology partners. This enables data-driven business insights and intelligent integrated applications that can drive employee productivity, resource optimization, and more effective end-customer interactions through simplified and automated workflows. Built with core cloud technologies that we own and manage internally, as well as integrated third-party applications from our technology partners, our XCaaS platform enables agile workplaces and fosters seamless communications and collaboration between an organization’s customers, contact center agents, and employees, regardless of geographic location.Our customers use our XCaaS platform to create tailored employee and customer experiences that increase productivity, improve responsiveness, and elevate customer and employee satisfaction and loyalty. Our service plans are structured with increasing levels of functionality and are designated as X1, X2, etc., through X8, based on the specific communication needs and customer engagement profile of each user. Because our XCaaS platform includes unified communications as-a-service, contact center as-a-service and communications platform as-a-service and serves as a single integration framework for communications and customer interactions across an organization, customers can reduce costs associated with provisioning and management, increase customization based on use cases, and facilitate compliance with security and data privacy requirements on a global scale. In fiscal 2023, we introduced platform-wide integration of generative artificial intelligence from OpenAI, making it easier for organizations to unlock the potential of generative artificial intelligence to personalize self-service, bot-based and agent-based customer engagements. The XCaaS platform also integrates with a growing ecosystem of third-party applications, ranging from purpose-built and vertically-focused artificial intelligence-based applications to broadly deployed customer relationship management platforms and leading customer engagement and workforce management software. Our solutions approach to third party integrations and platform-wide enablement of generative artificial intelligence, combined with flexibility to “mix and match” functionality based on users’ communication requirements and customer engagement profiles, allows organizations of all sizes to design and deploy tailored user experiences previously reserved to very large enterprises.Our customers range from small businesses to large enterprises across all vertical markets, with users in more than 160 countries. In recent years, we have increased our focus on mid-market, small- and mid-sized enterprise, and public sector customers because these organizations typically have more complex communication and contact center requirements compared to the needs of small business customers. Organizations in these sectors – typically with 500 to 10,000 employees -- are more likely to adopt multiple services and realize greater value from our unified, global communications platform and our growing product portfolio, including artificial intelligence-enabled solutions.We generate service revenue from subscriptions to our communications services subscriptions as well as from usage of our platform. We generate other revenue from professional services and the sale of office phones and other hardware equipment. 34We define a “customer” as one or more legal entities to which we provide services pursuant to a single contractual arrangement. In some cases, we may have multiple billing relationships with a single customer (for example, where we establish separate billing accounts for a parent company and each of its subsidiaries).SUMMARY AND OUTLOOKIn fiscal 2024, our total revenue decreased $15.2 million, or approximately 2% year-over-year, to $728.7 million. Our service revenue decreased $9.5 million, or approximately 1% year-over-year, to $700.6 million.As part of our long-term strategy to expand our enterprise customer base, grow our revenue, and increase our profitability and cash flow, we have focused on reducing the cost of delivering our services and improving our sales efficiency while increasing our investment in research and development. To improve our sales efficiency, we have focused our sales and marketing resources on mid-market and enterprise customers, since these customers are likely to derive the greatest benefit from our unified XCaaS platform. We have also expanded our partner programs to extend our reach within this market, placing increased emphasis on developing a community of value-added resellers who provide implementation services and Tier 1 customer support in addition to sales. To support our customers and partners, we are expanding our customer success organization and investing in improvements to our back-office processes to increase our operational efficiency over time. We believe that continued innovation is a critical factor in attracting and retaining mid-market and enterprise customers and is an important variable in achieving sustainable growth. We are committed to maintaining a high level of investment in engineering to deliver product innovation across our XCaaS platform, expand our ecosystem of integrated third-party applications, and maintain the high availability our customers require.In August 2022, we refinanced approximately $403.8 million of the $500.0 million aggregate principal amount of 2024 Notes through an exchange for approximately $201.9 million in 2028 Notes plus approximately $181.8 million in cash. The cash payment was funded with the partial proceeds of a new $250.0 million senior secured term loan due in 2027 entered into in August 2022. Concurrently with the issuance of the 2028 Notes, we repurchased 10,695,000 shares of our common stock for approximately $60.0 million in privately negotiated transactions with a limited number of holders. In September 2022, December 2022 and February 2023, we repurchased $6.0 million, $21.8 million and $5.0 million in aggregate principal amount of the 2024 Notes, respectively, in separate privately negotiated transactions. On February 1, 2024, we paid the remaining aggregate principal of $63.3 million, and accrued interest of $0.2 million, related to the 2024 Notes, which matured on February 1, 2024. See Note 8, Convertible Senior Notes and Term Loan to our consolidated financial statements for details. In May 2023, we voluntarily prepaid $25.0 million of principal on our senior secured term loan, reducing the total principal outstanding to $225.0 million. Due to the adjustable nature of the interest rate on our senior secured term loan, our net income may vary.KEY BUSINESS METRICSOur management periodically reviews certain key business metrics to evaluate our operations, allocate resources, and drive financial performance in our business.Annualized Recurring Subscriptions and Usage RevenueOur management has measured the success of our strategy to attract and retain customers, in part, by analyzing trends in annualized recurring and usage revenue, or ARR, and believes annualized recurring and usage revenue may be useful to investors in evaluating our performance. Our management believes annualized recurring and usage revenue has been a useful indicator for measuring the overall performance of the business because it includes new customer additions, add-on sales, renewals and customer churn within a single metric. However, as the nature of our business is evolving as we launch and grow multiple products that have consumption-based pricing, we are re-evaluating our methodology and key business metrics we use. Our management has historically used trends in annualized recurring and usage revenue to assess our ongoing operations, allocate resources, and drive the performance of the business. We currently define annualized recurring and usage revenue as (A) equal to the sum of the most recent month of (i) recurring subscription amounts and (ii) platform usage charges for all communications platform as-a-service customers that demonstrate consistent monthly usage above a minimum threshold over the prior six-month period, multiplied by 12, and (B) excluding any non-bundled or overage usage fees associated with unified communications as-a-service subscriptions.ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and ARR is not intended to be a substitute for, or combined with, any of these items. We caution that our presentation may not be consistent with that of other companies. We have historically analyzed annualized recurring and usage revenue within three separate customer categories: enterprise, mid-market and small business. We define enterprise customers as customers generating more than $100,000 in annualized recurring and usage revenue, mid-market as customers with annualized recurring and usage revenue between $25,000 and $100,000, and small business as customers with up to $25,000 in annualized recurring and usage revenue. Customers can move between categories over time based on individual annualized recurring and usage revenue. The Company continues to review annualized recurring and usage revenue growth, as well as changes in the mix, within the enterprise, mid-market and small business categories and relies on the growth percentage as one of the measures of potential future performance within the specific annualized recurring and usage revenue by customer size categories.35Total annualized recurring and usage revenue decreased 1% to $697.0 million at the end of fiscal 2024 from $703.0 million at the end of fiscal 2023. Enterprise annualized recurring and usage revenue decreased 1% to $402.0 million at the end of fiscal 2024 from $405.0 million the end of fiscal 2023. Mid-Market annualized recurring and usage revenue decreased 2% to $127.0 million at the end of fiscal 2024 from $130.0 million at the end of fiscal 2023. Small Business annualized recurring and usage revenue decreased 1% to $167.0 million at the end of fiscal 2024 from $168.0 million at the end of fiscal 2023.COMPONENTS OF RESULTS OF OPERATIONSService Revenue Service revenue consists of communication services subscriptions, platform usage revenue, and related fees from our unified communications as-a-service, contact center as-a-service, and communications platform as-a-service offerings. We plan to increase service revenue through a combination of new customer acquisition, cross-sell of additional products to existing customers, including new products resulting from our increased investment in innovation, geographic expansion of our customer base outside the United States, innovation in our products and technologies, and through strategic acquisitions of technologies and businesses.Other RevenueOther revenue consists of revenue from professional services, primarily in support of deployment of our solutions and/or platform, and revenue from sales and rentals of IP telephones in conjunction with our cloud telephony service. Other revenue is dependent on the number of customers who choose to purchase or rent an IP telephone hardware in conjunction with our service instead of using the solution on their cell phone, computer, or other compatible device, and/or choose to engage our professional services organization for implementation and deployment of our cloud services. Cost of Service RevenueCost of service revenue consists primarily of costs associated with network operations and related personnel, technology licenses, amortization of capitalized internal-use software, other communication origination and termination services provided by third-party carriers, outsourced customer service call center operations, and other costs such as customer service, and technical support costs. We allocate overhead costs, such as information technology and facilities, to cost of service revenue, as well as to each of the operating expense categories, generally based on relative headcount. Our information technology costs include costs for information technology infrastructure and personnel. Facilities costs primarily consist of office leases and related expenses.Cost of Other RevenueCost of other revenue consists primarily of direct and indirect costs associated with the purchase and shipping and handling of IP telephones as well as the scheduling, shipping and handling, personnel costs, and other expenditures incurred in connection with the professional services associated with the deployment and implementation of our products, and allocated information technology and facilities costs.Research and DevelopmentResearch and development expenses consist primarily of personnel and related costs, third-party development, software and equipment costs necessary for us to conduct our product, platform development and engineering efforts, as well as allocated information technology and facilities costs.Sales and MarketingSales and marketing expenses consist primarily of personnel and related costs, sales commissions, including those to the channel, trade shows, advertising and other marketing, demand generation, and promotional expenses, as well as allocated information technology and facilities costs.General and AdministrativeGeneral and administrative expenses consist primarily of personnel and related costs, professional services fees, corporate administrative costs, tax and regulatory fees, and allocated information technology and facilities costs.36Impairment of Long-Lived AssetsImpairment of long-lived assets consists of non-cash impairment charges for right-of-use assets and capitalized software. During the third quarter of fiscal year 2024, we partially ceased use of the Company's Headquarters and an international office space. We reviewed the recoverability of the related right-of-use assets and determined an impairment indicator was identified as these events indicated the carrying value of the right-of-use assets may not be recoverable. In connection with partially ceasing use of the Company’s Headquarters and an international office space, the Company recorded impairment charges of $9.9 million and $1.1 million, respectively, as the carrying amount of the right-of-use assets related to the leases exceeded its fair value based on the Company’s estimate of future discounted cash flows related to the leased facility. During the year ended March 31, 2024, the non-cash charge of $11.0 million was recorded as an impairment of long-lived assets on the consolidated statements of operations and consisted of an $11.0 million impairment of operating lease right-of-use assets. See Note 1, The Company and Significant Accounting Policies, for further details.During the year ended March 31, 2023, the impairment charge of $6.4 million was due to capitalized software and right-of-use assets of $3.7 million and $2.7 million, respectively.Other Expense, NetOther expense, net, consists primarily of interest expense related to our term loan and convertible notes, amortization of debt discount and issuance costs, offset by gains on debt extinguishment, as well as other income.Provision for (Benefit from) Income TaxesProvision for (benefit from) income taxes consists primarily of foreign income taxes and state minimum taxes in the United States. As we expand the scale of our international business activities, any changes in the United States and foreign taxation of such activities may increase our overall provision for income taxes in the future. We have a valuation allowance for our United States deferred tax assets, including federal and state non-operating loss carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized by way of expected future taxable income in the United States.RESULTS OF OPERATIONSRevenueService revenueFor the years ended March 31,(in thousands, except percentages)20242023ChangeService revenue$700,579 $710,044 $(9,465)(1.3)%Percentage of total revenue96.1 %95.4 %  Service revenue decreased by $9.5 million, or 1.3%, for fiscal 2024 compared to fiscal 2023, and this change was driven by a decrease in subscription revenue of $9.5 million related to increased customer churn and down-sell.We continue to monitor factors that could have an impact on customer buying behavior and demand, including macroeconomic conditions, contract duration, churn, upsell and down-sell, renewals, and payment terms, all of which could cause variability in our revenue.Other revenueFor the years ended March 31,(in thousands, except percentages)20242023ChangeOther revenue$28,126 $33,894 $(5,768)(17.0)%Percentage of total revenue3.9 %4.6 %  Other revenue decreased by $5.8 million, or 17.0%, in fiscal 2024, as compared to fiscal 2023, due to lower professional service and product revenue of $4.1 million and $1.7 million, respectively.Our business is diversified by vertical market and geography, and no single customer represented more than 10% of our total revenue during fiscal years 2024 and 2023.Cost of RevenueCost of service revenue37For the years ended March 31,(in thousands, except percentages)20242023ChangeCost of service revenue$192,960 $198,871 $(5,911)(3.0)%Percentage of service revenue27.5 %28.0 %  Cost of service revenue decreased $5.9 million, or 3.0%, during fiscal 2024 compared to fiscal 2023, due to decreases of $6.1 million related to the amortization of capitalized software and intangible assets and $2.6 million of combined employee, consulting and stock-based compensation expense. These decreases were partially offset by an increase of $2.8 million in costs to deliver our services.We expect cost of service revenue will increase in absolute dollars but generally remain consistent or decline as a percentage of revenue in future periods.Cost of other revenueFor the years ended March 31,(in thousands, except percentages)20242023ChangeCost of other revenue$31,945 $42,604 $(10,659)(25.0)%Percentage of other revenue113.6 %125.7 %  Cost of other revenue decreased $10.7 million, or 25.0%, in fiscal 2024 compared to fiscal 2023, primarily due to $7.8 million decreased personnel-related costs to deliver our professional services coupled with $2.9 million lower product costs.Operating ExpensesResearch and developmentFor the years ended March 31,(in thousands, except percentages)20242023ChangeResearch and development$136,216 $142,491 $(6,275)(4.4)%Percentage of total revenue18.7 %19.2 %  Research and development expenses decreased $6.3 million, or 4.4%, in fiscal 2024 compared to fiscal 2023, primarily due to decreases of $6.5 million in stock-based compensation, $1.8 million in amortization of capitalized software $0.6 million in software licenses. These decreases were partially offset by increases of $2.2 million in combined employee, consulting and facility costs and $0.3 million in internally-developed software and other costs.Sales and marketingFor the years ended March 31,(in thousands, except percentages)20242023ChangeSales and marketing$271,944 $311,883 $(39,939)(12.8)%Percentage of total revenue37.3 %41.9 %  Sales and marketing expenses decreased $39.9 million, or 12.8%, in fiscal 2024 compared to fiscal 2023 primarily due to decreases of $19.3 million in personnel-related and consulting costs, $17.2 million of combined paid media, marketing services and other costs, and $8.4 million in stock-based compensation expense. These decreases were partially offset by an increase of $5.2 million in channel commissions and amortization of deferred commission.General and administrativeFor the years ended March 31,(in thousands, except percentages)20242023ChangeGeneral and administrative$112,209 $108,001 $4,208 3.9 %Percentage of total revenue15.4 %14.5 %  General and administrative expenses increased $4.2 million, or 3.9%, in fiscal 2024 compared to fiscal 2023 primarily due a $13.9 million increase primarily due to Fuze regulatory charges and $3.4 million increase of combined acquisition, integration, contract termination and other costs. This increase was partially offset by decreases of $6.3 million in stock-based compensation and $6.9 million in personnel-related, consulting and other costs.38Impairment of long-lived assetsFor the years ended March 31,(in thousands, except percentages)20242023ChangeImpairment of long-lived assets$11,034 $6,380 $4,654 72.9 %Percentage of total revenue1.5 %0.9 %  Impairment of long-lived assets increased $4.7 million in fiscal 2024 compared to fiscal 2023. During the third quarter of fiscal 2024, we partially ceased use of the Company's Headquarters and an international office space. We reviewed the recoverability of the related right-of-use assets and determined an impairment indicator was identified as these events indicated the carrying value of the right-of-use assets may not be recoverable. In connection with partially ceasing use of the Company’s Headquarters and an international office space, the Company recorded impairment charges of $9.9 million and $1.1 million, respectively, as the carrying amount of the right-of-use assets related to the leases exceeded its fair value based on the Company’s estimate of future discounted cash flows related to the leased facility. During the year ended March 31, 2024, the non-cash charge of $11.0 million was recorded as an impairment of long-lived assets on the consolidated statements of operations and consisted of an $11.0 million impairment of operating lease right-of-use assets. See Note 1, The Company and Significant Accounting Policies, for further details.During the year ended March 31, 2023, the impairment charge of $6.4 million was due to capitalized software and right-of-use assets of $3.7 million and $2.7 million, respectively.Other expense, netFor the years ended March 31,(in thousands, except percentages)20242023ChangeOther expense, net$(36,347)$(4,044)$(32,303)NMPercentage of total revenue(5.0)%(0.5)%  We recognized $36.3 million of other expense, net during fiscal 2024 compared to $4.0 million of other expense, net during fiscal 2023 primarily due to $18.5 million gain from debt extinguishment from the 2024 convertible notes recorded in the prior year compared to a $1.8 million loss on debt extinguishment in fiscal 2024, $12.3 million increase in interest expense on our variable-rate term loan entered into in the second quarter of fiscal 2023, an increase of $2.0 million in unrealized foreign exchange losses, and $1.8 million of gain on sale of assets recorded in the prior year. These were partially offset by $2.8 million of other income driven by interest income earned on available-for-sale investments and $1.8 million gain on remeasurement of warrants issued in connection with the term loan.Provision for income taxesFor the years ended March 31,(in thousands, except percentages)20242023ChangeProvision for income taxes$3,642 $2,807 $835 29.7 %Percentage of total revenue0.5 %0.4 %  For the year ended March 31, 2024, we recorded an income tax provision of $3.6 million compared to an income tax provision of $2.8 million in fiscal 2023, primarily due to higher federal and state income taxes as a result of the application of certain 2017 Tax Cuts and Jobs Act tax law changes that limited the amount of taxable income that can be offset by net operating loss carryforwards.39Liquidity and Capital ResourcesWe believe that our existing cash, cash equivalents and investment balances and our anticipated cash flows from operations will be sufficient to meet our working capital, expenditure, and contractual obligation requirements for the next 12 months and the foreseeable future. Although we believe we have adequate sources of liquidity for the next 12 months and the foreseeable future, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets could impact our business and liquidity.Cash, Cash Equivalents, and InvestmentsAs of March 31, 2024, we had $117.3 million of cash and cash equivalents and short-term investments. In addition, we had $0.5 million in restricted cash in support of letters of credit securing leases for office facilities. Our primary requirements for liquidity and capital are working capital, research and development and marketing activities, principal and interest payments on our outstanding debt and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents. Our current capital deployment strategy for fiscal 2024 is to invest excess cash on hand to support our continued growth initiatives into select markets and planned software development activities, and pay down our debt. As of March 31, 2024, we are not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. Significant cash requirements for the upcoming fiscal year include our interest payments related to our debt obligations, operating lease obligations, and operating and capital purchase commitments. For information regarding our expected cash requirements and timing of payments related to leases and noncancellable purchase commitments, see Note 6, Leases, and Note 7, Commitments and Contingencies, respectively, to the consolidated financial statements. Additionally, refer to Note 8, Convertible Senior Notes and Term Loan, to the consolidated financial statements for more information related to our debt obligations and applicable covenants.Cash FlowsThe following is a summary of our cash flows provided by (used in) operating, investing and financing activities: Years Ended March 31,(In thousands)202420232022Net cash provided by operating activities$78,985 $48,786 $34,680 Net cash provided by (used in) investing activities8,546 6,050 (159,978)Net cash provided by (used in) financing activities(83,411)(37,784)105,425 Effect of exchange rate changes on cash(126)(5,037)(585)Net increase (decrease) in cash and cash equivalents$3,994 $12,015 $(20,458)Cash provided by operating activities increased by $30.2 million to $79.0 million for fiscal 2024, mainly due to an increase in cash received from customers, decrease in cash paid to suppliers, and a decrease in cash paid for sales commission costs. Cash provided by investing activities increased $2.5 million to $8.5 million for fiscal 2024, mainly due to decreases in the purchases, sales, and maturities of investments. Cash used in financing activities increased by $45.6 million to $83.4 million for fiscal 2024, due to principal repayments of $25.0 million on the term loan and $234.8 million proceeds in fiscal 2023 offset by a reduction in repayment and exchange of $154.0 million on the convertible senior notes and repurchase of common stock of $60.2 million in fiscal 2023.Debt ObligationsSee Note 8, Convertible Senior Notes and Term Loan in the audited consolidated financial statements included elsewhere in this Annual Report for information regarding our debt obligations.40Material Cash Requirements and Other ObligationsThe following table summarizes the payments due for our outstanding contractual obligations as of March 31, 2024: TotalLess than 1 year1-3 years3-5 yearsThereafter2028 NotesPrincipal payments$201,914 $— $201,914 $— $— Interest payments32,307 8,077 24,230 — — Term loan(1)Principal payments225,000 — 225,000 — — Interest payments(2)92,393 27,718 64,675 — — Operating lease obligations(3)77,284 13,737 23,964 21,148 18,435 Purchase obligations61,154 44,855 15,150 877 272 Total$690,052 $94,387 $554,933 $22,025 $18,707 (1) See Note 8, Convertible Senior Notes and Term Loan, in the Notes to Consolidated Financial Statements included in this Annual Report for further information.(2) Total interest payments of $92.4 million were determined using the effective interest rate of 11.9% as of March 31, 2024. See Note 8, Convertible Senior Notes and Term Loan, in the Notes to Consolidated Financial Statements included in this Annual Report regarding the interest rate terms.(3) See Note 6, Leases, in the Notes to Consolidated Financial Statements included in this Annual Report for further information.CRITICAL ACCOUNTING POLICIES AND ESTIMATESOur consolidated financial statements are prepared in accordance with U.S. GAAP. Refer to Note 1, The Company and Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in this Annual Report, which describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.We have identified the policies below as critical to our business and the understanding of our results of operations. These policies may involve a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the preparation of our consolidated financial statements. Although we believe our judgments and estimates are appropriate, actual future results may differ from our estimates. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. The impact and any associated risks related to these policies on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations", where such policies affect our reported and expected financial results.Revenue RecognitionSignificant management judgments and estimates must be made and used in connection with the revenue recognized in any accounting period. Material differences may result in the amount and timing of our revenue for any period if management made different judgments or utilized different estimates.Revenue is recognized when performance obligations are satisfied, based on the transaction price. We generally bill our customers on a monthly basis. Contracts typically range from annual to multi-year agreements, generally with payment terms of net 30 days. We record reductions to revenue for estimated sales returns and customer credits at the time the related revenue is recognized. Sales returns and customer credits are estimated based on our historical experience, current trends, and our expectations regarding future service delivery and platform performance. We monitor the accuracy of its sales reserve estimates by reviewing actual returns and credits and adjust them for its future expectations to determine the adequacy of its current and future reserve needs. If actual future returns and credits differ from past experience, additional reserves may be required.Service Revenue RecognitionService revenue from subscriptions to our cloud-based technology platform is recognized on a ratable basis over the contractual subscription term beginning on the date that the platform is delivered to the customer until the end of the contractual period. Payments received in advance of subscription services being rendered are recorded as deferred revenue; revenue recognized for services rendered in advance of payments received are recorded as contract assets. Usage fees, when bundled, are billed in advance and recognized over time on a ratable basis over the contractual subscription term. Non-bundled usage fees are recognized as actual usage occurs. Other Revenue RecognitionOther revenue is primarily comprised of product revenue and professional services revenue. We recognize product revenue for telephony equipment at a point in time when transfer of control has occurred, which is generally upon shipment. Sales returns are recorded as a reduction to revenue estimated based on historical experience. Professional services for deployment, 41configuration, system integration, optimization, customer training or education are primarily billed on a fixed-fee basis and are performed by us directly. Professional services revenue is recognized as services are performed or upon completion of the deployment.Allowance for Credit LossesWe account for allowances for credit losses under the current expected credit loss, or CECL, impairment model for our financial assets, including accounts receivable, and present the net amount of the financial instrument expected to be collected. The current expected credit loss impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions. Using this model, we estimate the adequacy of the allowance for credit losses at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, communications with customers, and macro-economic conditions. Amounts are written off after considerable collection efforts have been made and the amounts are determined to be uncollectible.AcquisitionsAcquisitions are accounted for as business combinations, which treatment requires that the various assets acquired and liabilities assumed be recognized based on their fair value, accordingly, significant estimates and judgments are made to arrive at the fair values. The use of estimates involves uncertainty, therefore, the initial accounting for goodwill, intangible assets (and related amortization in future periods), property, plant and equipment, right of use assets (and related operating lease liabilities and amortization), prepaid and other current assets, accrued liabilities, deferred revenue, holdback consideration, and other liabilities are all subject to estimates. The actual results could be significantly different from the estimates.Capitalized Internal-Use Software CostsCertain costs of software are capitalized during the application development phase. We begin to capitalize costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be used as intended. Capitalized internal-use software development costs are included in property and equipment. Once the project has been completed, these costs are amortized to cost of service revenue on a straight-line basis over the estimated useful life of the related asset as noted in Property and Equipment.Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded in research and development expense. We test capitalized internal-use software development costs for impairment on an annual basis, or as events occur or circumstances change that could impact the recoverability of the capitalized costs. Accounting for Long-Lived AssetsWe review the recoverability of our long-lived assets, such as property and equipment, right-of-use assets, definite lived intangibles, or capitalized internal-use software costs, when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. Examples of such events could include the disposal of a significant portion of such asset, an adverse change in the market involving the business employing the related asset, or a significant change in the operation or use of an asset. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate the fair value of long-lived assets and asset groups through future cash flows.During fiscal 2024, we recorded an impairment of long-lived assets related to the Company's right-of-use assets on the consolidated statements of operations. See Note 6, Leases, for further details.Goodwill and Other Intangible AssetsGoodwill represents the excess fair value of consideration transferred over the fair value of net assets acquired in business combinations. Goodwill and intangible assets with indefinite useful lives are not amortized but are tested annually for impairment and more often if there is an indicator of impairment. We perform testing for impairment of goodwill on an annual basis, or as events occur or circumstances change that would more likely than not reduce the fair value of our single reporting unit below its carrying amount. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.Intangible assets, consisting of acquired developed technology, domain names, and customer relationships, acquired in business combinations were initially measured at fair value and were determined to have definite lives. Thereafter, intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense related to developed technology is included in cost of revenue. Amortization expense related to customer relationships and domain names are included in sales and marketing expense. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable.42ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest Rate Fluctuation RiskCash, Cash Equivalents and Short-Term InvestmentsWe had cash, cash equivalents, and investments totaling $117.3 million as of March 31, 2024. Cash equivalents and investments were invested primarily in money market funds, United States treasury, commercial paper, and corporate bonds. Our investment policy is focused on the preservation of capital and supporting our liquidity needs. Under the policy, we invest in highly rated securities, while limiting the amount of credit exposure to any one issuer other than the United States government. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. We utilize external investment managers who adhere to the guidelines of our investment policy. A hypothetical 10% change in interest rates would not have a material impact on the value of our cash, cash equivalents, or available-for-sale investments.Term LoanThe Company is subject to interest rate risk with the Term Loan as we pay interest on the principal balance at a variable rate. As of March 31, 2024, the aggregate principal of the term loan was $225.0 million. A hypothetical variable interest rate increase of 10%, would increase our annual interest expense by approximately $2.4 million on our consolidated results of operations.2028 NotesAs of March 31, 2024, we have $201.9 million aggregate principal amount of the 2028 Notes. Our 2028 Notes bear a fixed interest rate, and therefore, is not subject to interest rate risk as the 2028 Notes are recorded at face value, less unamortized discount, on our consolidated balance sheets, and we present the fair value for required disclosure purposes only.Foreign Currency Exchange RiskWe have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the United States dollar, primarily the British Pound and Euro, causing both our revenue and our operating results to be impacted by fluctuations in the exchange rates.Gains or losses from the revaluation of certain cash balances, accounts receivable balances and intercompany balances that are denominated in these currencies impact our net income (loss). A hypothetical decrease in all foreign currencies against the United States dollar of 10% would not result in a material foreign currency loss on foreign-denominated balances as of March 31, 2024. As our foreign operations expand, our results may be more impacted by fluctuations in the exchange rates of the currencies in which we do business.At this time, we do not, but we may in the future, enter into financial instruments to hedge our foreign currency exchange risk.43ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE PageFINANCIAL STATEMENTS: Reports of Independent Registered Public Accounting Firm (Moss Adams LLP, Campbell, California, PCAOB ID: 659)45Consolidated Balance Sheets46Consolidated Statements of Operations47Consolidated Statements of Comprehensive Loss48Consolidated Statements of Stockholders' Equity49Consolidated Statements of Cash Flows50Notes to Consolidated Financial Statements 5244Report of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of 8x8, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of 8x8, Inc. (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended March 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.Basis for OpinionsThe Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Management’s Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.Impairment of Long-Lived Assets-Right-of-use ("ROU") AssetsAs described in Notes 1 and 6 to the consolidated financial statements, the Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company's ability to recover the carrying value of the asset or asset group from the expected future cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate the fair value of long-lived assets and asset groups through future cash flows. In connection with partially ceasing use of the Company’s headquarters and an international office space, the Company recorded impairment charge of $11.0 million during the year ended March 31, 2024, as the carrying amount of the right-of-use assets related to the leases exceeded their fair values based on the Company’s estimate of future discounted cash flows under the income approach, which included the use of significant assumptions by management related to discount rates, estimated sublease income, and temporary idling periods.We identified the valuation of the right-of-use assets as a critical audit matter. The valuation of the right-of-use assets involved the application of management judgment in determining the significant assumptions used in the discounted cash flows analysis to estimate fair values. Auditing management’s judgments regarding the significant assumptions used in the discounted cash flows analysis involved significant audit effort, as well as especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.The primary procedures we performed to address this critical audit matter included:•Testing the design, implementation, and operating effectiveness of controls used in management’s estimates of fair value using an income approach.•Evaluating the methods used by management included (a) obtaining an understanding of the Company’s plans and the Board of Director’s actions relating to the partially ceasing use of office space (b) evaluating management’s determination of the unit of account and (c) assessing the appropriateness of the estimation techniques utilized.•Testing the completeness and accuracy of certain underlying data used by management and evaluating the relevance and reliability of the sources of the data used.•Identifying and evaluating the reasonableness of the significant assumptions used by management, including discount rates, estimated sublease income, and temporary idling periods.•Involving professionals with specialized skill and knowledge to assist in evaluating the estimated sublease income, temporary idling periods, discount rates, and future cash flows used by management./s/ Moss Adams LLPCampbell, CaliforniaMay 21, 2024We have served as the Company’s auditor since 2008.458X8, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share amounts) As of March 31,20242023ASSETSCurrent assets:Cash and cash equivalents$116,262 $111,400 Restricted cash, current356 511 Short-term investments1,048 26,228 Accounts receivable, net58,979 62,307 Deferred sales commission costs, current35,933 38,048 Other current assets35,258 34,630 Total current assets247,836 273,124 Property and equipment, net53,181 57,871 Operating lease, right-of-use assets35,924 52,444 Intangible assets, net86,717 107,112 Goodwill266,574 266,863 Restricted cash, non-current105 818 Deferred sales commission costs, non-current52,859 67,644 Other assets, non-current12,783 15,934 Total assets$755,979 $841,810 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable$48,862 $46,802 Accrued and other liabilities78,102 73,740 Operating lease liabilities, current11,295 11,504 Deferred revenue, current34,325 34,909 Convertible senior notes, current— 62,932 Total current liabilities172,584 229,887 Operating lease liabilities, non-current56,647 65,623 Deferred revenue, non-current7,810 10,615 Convertible senior notes, non-current197,796 196,821 Term loan211,894 231,993 Other liabilities, non-current7,290 6,965 Total liabilities654,021 741,904 Commitments and contingencies (Note 7)Stockholders' equity:Preferred stock: $0.001 par value, 5,000,000 shares authorized, none issued and outstanding as of March 31, 2024 and 2023— — Common stock: $0.001 par value, 300,000,000 shares authorized, 125,193,573 shares and 114,659,255 shares issued and outstanding at March 31, 2024 and 2023, respectively125 115 Additional paid-in capital973,895 905,635 Accumulated other comprehensive loss(11,553)(12,927)Accumulated deficit(860,509)(792,917)Total stockholders' equity101,958 99,906 Total liabilities and stockholders' equity$755,979 $841,810 The accompanying notes are an integral part of these consolidated financial statements.468X8, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts) For the years ended March 31,202420232022Service revenue$700,579 $710,044 $602,357 Other revenue28,126 33,894 35,773 Total revenue728,705 743,938 638,130 Cost of service revenue192,960 198,871 195,909 Cost of other revenue31,945 42,604 51,649 Total cost of revenue224,905 241,475 247,558 Gross profit503,800 502,463 390,572 Operating expenses:Research and development136,216 142,491 112,387 Sales and marketing271,944 311,883 314,223 General and administrative112,209 108,001 118,103 Impairment of long-lived assets11,034 6,380 — Total operating expenses531,403 568,755 544,713 Loss from operations(27,603)(66,292)(154,141)Other expense, net(36,347)(4,044)(21,629)Loss before provision (benefit) for income taxes(63,950)(70,336)(175,770)Provision (benefit) for income taxes3,642 2,807 (387)Net loss$(67,592)$(73,143)$(175,383)Net loss per share:Basic and diluted$(0.56)$(0.63)$(1.55)Weighted average number of shares:Basic and diluted121,106 115,959 113,354 OTHER EXPENSE, NET DETAILS(in thousands)For the years ended March 31,202420232022Interest expense$(35,352)$(23,020)$(2,271)Amortization of debt discount and issuance costs(4,472)(4,254)(20,404)Gain on warrants remeasurement2,176 417 — Gain (loss) on debt extinguishment(1,766)18,545 — Gain (loss) on sale of assets(179)1,821 (68)Gain (loss) on foreign exchange(1,032)993 908 Other income4,278 1,454 206 Other expense, net$(36,347)$(4,044)$(21,629)The accompanying notes are an integral part of these consolidated financial statements.478X8, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(in thousands) For the years ended March 31,202420232022Net loss$(67,592)$(73,143)$(175,383)Other comprehensive income (loss), net of taxUnrealized gain (loss) on investments in securities280 (184)(571)Foreign currency translation adjustment1,094 (4,830)(3,149)Comprehensive loss$(66,218)$(78,157)$(179,103)The accompanying notes are an integral part of these consolidated financial statements.488X8, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except shares) Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal SharesAmountBalance at March 31, 2021109,134,739 $109 $755,643 $(4,193)$(591,055)$160,504 Issuance of common stock under stock plans, less withholding6,969,809 7 15,915 — — 15,922 Stock-based compensation expense— — 132,736 — — 132,736 Stock-based compensation expense related to Fuze acquisition53,498 — 828 — — 828 Forfeiture of common stock related to Wavecell acquisition(25,536)— — — — — Issuance of common stock related to Fuze acquisition4,070,355 4 80,852 — — 80,856 Share repurchases(2,340,058)(2)(44,974)— — (44,976)Equity component of convertible senior notes, net of issuance cost— — 15,599 — — 15,599 Unrealized investment loss— — — (571)— (571)Foreign currency translation adjustment— — — (3,149)— (3,149)Net loss— — — — (175,383)(175,383)Balance at March 31, 2022117,862,807 118 956,599 (7,913)(766,438)182,366 Adjustment related to adoption of ASU 2020-06— — (92,832)— 46,672 (46,160)Issuance of common stock under stock plans, less withholding6,498,922 7 4,678 — — 4,685 Stock-based compensation expense— — 92,065 — — 92,065 Forfeiture of common stock related to Wavecell acquisition(22,311)— — — — — Repurchase of capped calls— — 244 — — 244 Share repurchases(10,695,187)(11)(60,203)— — (60,214)Shares issued for debt issuance1,015,024 1 5,084 — — 5,085 Dissolution of investment in foreign subsidiary— — — — (8)(8)Unrealized investment loss— — — (184)— (184)Foreign currency translation adjustment— — — (4,830)— (4,830)Net loss— — — — (73,143)(73,143)Balance at March 31, 2023114,659,255 115 905,635 (12,927)(792,917)99,906 Issuance of common stock under stock plans, less withholding7,612,910 7 (7)— — — ESPP issuance1,883,318 2 4,882 — — 4,884 Stock-based compensation expense— — 63,386 — — 63,386 Issuance of common stock under stock plans, less withholding, related to Fuze acquisition1,038,090 1 (1)— — — Unrealized investment gain— — — 280 — 280 Foreign currency translation adjustment— — — 1,094 — 1,094 Net loss— — — — (67,592)(67,592)Balance at March 31, 2024125,193,573 $125 $973,895 $(11,553)$(860,509)$101,958 The accompanying notes are an integral part of these consolidated financial statements.498X8, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) For the years ended March 31,202420232022Cash flows from operating activities:   Net loss$(67,592)$(73,143)$(175,383)Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation8,301 10,464 11,374 Amortization of intangible assets20,395 21,078 8,317 Amortization of capitalized internal-use software costs18,486 20,739 28,863 Impairment of capitalized software— 3,729 — Amortization of debt discount and issuance costs4,472 4,254 20,404 Amortization of deferred sales commission costs40,181 38,195 34,701 Allowance for credit losses2,236 1,892 1,974 Operating lease expense, net of accretion10,934 12,030 13,482 Impairment of right-of-use assets11,034 2,651 — Stock-based compensation expense61,910 89,536 133,331 (Gain) loss on debt extinguishment1,766 (18,545)— Gain on remeasurement of warrants(2,176)(417)— (Gain) loss on sale of assets179 (1,821)— Other680 101 3,726 Changes in assets and liabilities:Accounts receivable, net753 (8,450)6,867 Deferred sales commission costs(22,879)(31,086)(44,224)Other current and non-current assets(2,348)2,150 (4,022)Accounts payable and accruals(4,182)(24,403)(8,740)Deferred revenue(3,165)(168)4,010 Net cash provided by operating activities78,985 48,786 34,680 Cash flows from investing activities:Purchases of property and equipment(2,650)(2,991)(4,137)Proceeds from sale of intangible assets— 1,000 — Capitalized internal-use software costs(14,289)(11,896)(20,370)Purchases of investments(6,174)(53,308)(83,383)Sales of investments— 8,296 13,299 Maturities of investments31,659 66,199 60,023 Acquisition of businesses, net of cash acquired— (1,250)(125,410)Net cash provided by (used in) investing activities8,546 6,050 (159,978)Cash flows from financing activities:Finance lease payments— — (15)Tax-related withholding of common stock— — (310)Proceeds from issuance of common stock under employee stock plans4,884 4,679 16,107 Repurchase of capped calls— 244 — Repayment of principal on term loan(25,000)— — Net proceeds from term loan— 234,806 — Repayment of convertible senior notes(63,295)(217,299)— Proceeds from issuance of convertible senior notes— — 134,619 Repurchase of common stock— (60,214)(44,976)Net cash provided by (used in) financing activities(83,411)(37,784)105,425 Effect of exchange rate changes on cash(126)(5,037)(585)Net increase (decrease) in cash and cash equivalents3,994 12,015 (20,458)Cash, cash equivalents and restricted cash, beginning of year112,729 100,714 121,172 Cash, cash equivalents and restricted cash, end of year$116,723 $112,729 $100,714 50Supplemental and non-cash disclosures:For the years ended March 31,202420232022Interest paid$35,574 $22,162 $2,156 Income taxes paid$5,974 $1,530 $1,320 Payables and accruals for property and equipment$3,868 $38 $88 Warrants issued in connection with term loan$— $5,915 $— Shares issued in connection with term loan and convertible senior notes$— $5,084 $— Issuance of 2028 convertible senior notes in exchange of 2024 convertible senior notes$— $201,914 $— Right-of-use assets acquired in connection with Fuze acquisition$— $— $7,261 Shares consideration in connection with Fuze acquisition$— $— $80,856 Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: As of March 31,202420232022Cash and cash equivalents$116,262 $111,400 $91,205 Restricted cash, current356 511 8,691 Restricted cash, non-current105 818 818 Total cash, cash equivalents and restricted cash$116,723 $112,729 $100,714 The accompanying notes are an integral part of these consolidated financial statements.518X8, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIESTHE COMPANY8x8, Inc. ("8x8" or the "Company") was incorporated in California in February 1987 and was reincorporated in Delaware in December 1996. The Company trades under the symbol "EGHT" on the Nasdaq Global Select Market.The Company is a leading Software-as-a-Service ("SaaS") provider of contact center, voice, video, chat, and enterprise-class API solutions powered by one global cloud communications platform. 8x8 empowers workforces worldwide by connecting individuals and teams, so they can collaborate faster and work smarter from anywhere. 8x8 provides real-time business analytics and intelligence, giving its customers unique insights across all interactions and channels on its platform, so they can support a distributed and hybrid working model while delighting their end-customers and accelerating their business. A majority of all revenue is generated from communication services subscriptions and platform usage. The Company also generates revenue from sales of hardware and professional services, which are complementary to the delivery of its integrated technology platform. BASIS OF PRESENTATION AND CONSOLIDATIONThe Company's fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in these Notes to Consolidated Financial Statements refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ended March 31, 2024).All dollar amounts herein are in thousands of United States Dollars ("Dollars") unless otherwise noted.The consolidated financial statements include the accounts of 8x8 and its subsidiaries. All material intercompany accounts and transactions have been eliminated.CHANGE IN REPORTING PRESENTATIONHistorically, accrued compensation, accrued taxes, and other accrued liabilities have been presented separately on the consolidated balance sheets and cost of revenue and cost of other revenue have been presented within operating expenses. During the fourth quarter of fiscal 2024, the Company made the following voluntary changes in accounting presentation and reclassified prior period amounts to conform to current year presentation:•Consolidated accrued compensation, accrued taxes, and other accrued liabilities into accrued and other liabilities on the consolidated balance sheets, see Note 4, Financial Statement Components, for further details.•Separately state cost of revenue, cost of other revenue and recognize gross profit on the Company's consolidated statement of operations.Additionally, the results of operations for the year ended March 31, 2023 have been reclassified to conform to the Company's current period presentation. During the year ended March 31, 2023, the Company reclassified $3.7 million impairment of capitalized software from research and development expenses to impairment of long-lived assets and a $2.7 million impairment of right-of-use assets from general and administrative expenses to impairment of long-lived assets. These prior period reclassifications had no impact on our consolidated balance sheets, statements of comprehensive loss, statements of stockholders' equity and cash flows.USE OF ESTIMATESThe preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to current expected credit losses, returns reserve for expected cancellations, fair value of and/or potential impairment of goodwill and value and useful life of long-lived assets (including intangible assets and right-of-use assets), capitalized internal-use software costs, benefit period for deferred commissions, stock-based compensation, incremental borrowing rate used to calculate operating lease liabilities, income and sales tax liabilities, convertible senior notes fair value, litigation, and other contingencies. The Company bases its estimates on known facts and circumstances, historical experience, and various other assumptions. Actual results could differ from those estimates under different assumptions or conditions.REVENUE RECOGNITIONAs described below, significant management judgments and estimates must be made and used in connection with the recognition of revenue. Material differences may result in the amount and timing of our revenue if management were to make different judgments or utilize different estimates.The Company recognizes revenue using the five-step model prescribed by U.S. GAAP, as follows:•identification of the contract, or contracts, with a customer;52•identification of the performance obligations in the contract;•determination of the transaction price;•allocation of the transaction price to the performance obligations in the contract; and•recognition of revenue when, or as, the Company satisfies a performance obligation.The Company identifies performance obligations in contracts with customers, which may include subscription services and related usage, product revenue, and professional services. The transaction price is determined based on the amount we expect to be entitled to receive in exchange for transferring the promised services or products to the customer. The transaction price in the contract is allocated to each distinct performance obligation in an amount that represents the relative amount of consideration expected to be received in exchange for satisfying each performance obligation. Revenue is recognized when performance obligations are satisfied, based on the transaction price, excluding amounts collected on behalf of third parties such as sales and telecommunication taxes, which are collected on behalf of and remitted to governmental authorities. We generally bill our customers on a monthly basis. Contracts typically range from annual to multi-year agreements with payment terms of net 30 days. We occasionally allow a 30-day period to cancel a subscription and return products shipped for a full refund.The Company records reductions to revenue for estimated sales returns and customer credits at the time the related revenue is recognized. Sales returns and customer credits are estimated based on historical experience, current trends, and expectations regarding future experience. The Company monitors the accuracy of its sales reserve estimates by reviewing actual returns and credits and adjusts them for its future expectations to determine the adequacy of its current and future reserve needs. If actual future returns and credits differ from past experience, additional reserves may be required.When the Company's services do not meet certain service level commitments, customers are entitled to receive service credits, and in certain cases, refunds, each representing a form of variable consideration. The Company historically has not experienced any significant incidents affecting the defined levels of reliability and performance as required by its subscription contracts. Accordingly, the amount of any estimated refunds related to these agreements in the consolidated financial statements is not material during the periods presented.Judgments and EstimatesThe estimation of variable consideration for each performance obligation requires the Company to make subjective judgments. The Company has service-level agreements with customers warranting defined levels of uptime reliability and performance. Customers may get credits or refunds if the Company fails to meet such levels. If the services do not meet certain criteria, fees are subject to adjustment or refund representing a form of variable consideration. The Company may impose minimum revenue commitments ("MRC") on its customers at the inception of the contract. Thus, in estimating variable consideration for each of these performance obligations, the Company assesses both the probability of MRC occurring and the collectability of the MRC, both of which represent a form of variable consideration.The Company enters into contracts with customers that regularly include promises to transfer multiple services and products, such as subscriptions, products, and professional services. For arrangements with multiple services, the Company evaluates whether the individual services qualify as distinct performance obligations. In its assessment of whether a service is a distinct performance obligation, the Company determines whether the customer can benefit from the service on its own or with other readily available resources, and whether the service is separately identifiable from other services in the contract. This evaluation requires the Company to assess the nature of each individual service offering and how the services are provided in the context of the contract, including whether the services are significantly integrated, highly interrelated, or significantly modify each other, which may require judgment based on the facts and circumstances of the contract.When agreements involve multiple distinct performance obligations, the Company allocates arrangement consideration to all performance obligations at the inception of an arrangement based on the relative standalone selling prices ("SSP") of each performance obligation. Usage fees deemed to be variable consideration meet the allocation exception for variable consideration. Where the Company has standalone sales data for its performance obligations which are indicative of the price at which the Company sells a promised good or service separately to a customer, such data is used to establish SSP. In instances where standalone sales data is not available for a particular performance obligation, the Company estimates SSP by the use of observable market and cost-based inputs. The Company continues to review the factors used to establish list price and will adjust standalone selling price methodologies as necessary on a prospective basis. Service RevenueService revenue from subscriptions to the Company's cloud-based technology platform is recognized ratably over the contractual subscription term, beginning on the date that the platform is delivered to the customer until the end of the contractual period. Payments received in advance of subscription services being rendered are recorded as deferred revenue; revenue recognized for services rendered in advance of payments received are recorded as contract assets. Usage fees, when bundled, are billed in advance and recognized over time on a ratable basis over the contractual subscription term, which is usually the monthly contractual billing period. Non-bundled usage fees are recognized as actual usage occurs. Other RevenueOther revenue comprises primarily of product revenue and professional services revenue.53The Company recognizes product revenue for telephony equipment at the point in time when transfer of control has occurred, which is generally upon shipment. Sales returns are recorded as a reduction to revenue estimated based on historical experience. Professional services for deployment, configuration, system integration, optimization, customer training, or education are primarily billed on a fixed-fee basis and are performed by the Company directly. Professional services revenue is recognized as services are performed or upon completion of the deployment.Contract AssetsContract assets are recorded for contract consideration not yet invoiced but for which the performance obligations are completed. The revenue is recognized when the customer receives services or equipment for a reduced consideration at the onset of an arrangement, for example, when the initial month's services or equipment are discounted. Contract assets are included in other current assets or other assets in the Company's consolidated balance sheets, depending on if their reduction will be recognized during the succeeding twelve-month period or beyond.Deferred RevenueDeferred revenue represents billings or payments received in advance of revenue recognition and are recognized upon transfer of control. Balances consist primarily of annual plan subscription services and professional and training services not yet provided as of the balance sheet date. Revenue that will be recognized during the twelve-month period in which the Company is providing services are recorded as deferred revenue, current in the consolidated balance sheets, with the remainder recorded as other liabilities, non-current in the Company's consolidated balance sheets.Deferred Sales Commission CostsSales commissions are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized as deferred sales commission costs and amortized on a straight-line basis over the anticipated benefit period of five years. The benefit period was estimated by taking into consideration the length of customer contracts, technology lifecycle, and other factors. This amortization expense is recorded in sales and marketing expense within the Company's consolidated statement of operations.The Company applies a practical expedient that permits it to apply an anticipated benefit period to a portfolio of contracts, instead of on a contract-by-contract basis, as they are similar in their characteristics, and the financial statement effects of that application to the portfolio would not differ materially from applying it to the individual contracts within that portfolio. CASH, CASH EQUIVALENTS, AND INVESTMENTSThe Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.Investments in debt securities are classified as available-for-sale and reported at fair value, based either upon quoted prices in active markets, quoted prices in less active markets, or quoted market prices for similar investments, with unrealized gains and losses, net of related tax, if any, included in other comprehensive income (loss) and disclosed as a separate component of stockholders' equity. Realized gains and losses on sales of all such investments are reported within the caption of other income (expense), net in the consolidated statements of operations and computed using the specific identification method. The Company classifies its investments as short-term or long-term based on the nature of the investments and their availability for use in current operations. The Company's investments in debt securities are monitored on a periodic basis for impairment. In the event the carrying value of an investment exceeds its fair value and the decline in value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis for the investment is established. These available-for-sale investments are primarily held in the custody of two major financial institutions.ALLOWANCE FOR CREDIT LOSSESThe Company accounts for allowance for credit losses under the current expected credit loss, or CECL, impairment model for its financial assets, including accounts receivable, and presents the net amount of the financial instrument expected to be collected. The current expected credit loss impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions. Based on this model, the Company estimates the amount of uncollectible accounts receivable at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, communications with its customers, and macro-economic conditions. Amounts are written off after considerable collection efforts have been made and the amounts are determined to be uncollectible.CONCENTRATIONSFinancial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, investments, and trade accounts receivable. The Company has cash equivalents and investment policies that limit the amount of credit exposure to any one financial institution and restrict placement of these funds to financial institutions evaluated as highly credit-worthy. Although the Company deposits its cash with multiple financial institutions, its deposits may exceed federally insured limits. The Company has not experienced any material losses relating to its investments.54The Company sells its products to customers and distributors. The Company performs credit evaluations of its customers' financial condition and generally does not require collateral from its customers. As of March 31, 2024 and 2023, no customer accounted for more than 10% of accounts receivable. For the years ended March 31, 2024, 2023, and 2022, no customer accounted for more than 10% of revenue.The Company purchases all of its hardware products from suppliers that manufacture the hardware directly and from their distributors. The inability of any supplier to fulfill supply requirements of the Company could materially impact future operating results, financial position, or cash flows.The Company also relies primarily on third-party network service providers to provide telephone numbers and public switched telephone network ("PSTN") call termination and origination services for its customers. If these service providers failed to perform their obligations to the Company, such failure could materially impact future operating results, financial position, and cash flows.OPERATING LEASE, RIGHT-OF-USE ASSETS, AND LEASE LIABILITIESThe Company primarily leases facilities for office and data center space under non-cancellable operating leases for its United States and international locations that expire at various dates through 2030. For leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability based on the present value of lease payments over the lease term. Variable lease payments are not included in the lease payments to measure the lease liability and are expensed as incurred. The Company’s leases have remaining terms of one year to seven years. Some of the leases include a Company option to extend the lease term for less than 12 months to five years, or more, which if reasonably certain to be exercised, the Company includes in the determination of lease payments. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. As most of the Company's leases do not provide a readily determinable implicit rate, the Company uses its incremental borrowing rate at lease commencement, which is determined using a portfolio approach, based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses the implicit rate when a rate is readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the Company's consolidated balance sheets, and the expense for these short-term leases is recognized on a straight-line basis over the lease term. In connection with partially ceasing use of the Company’s Headquarters and an international office space, the Company recorded impairment charges of $9.9 million and $1.1 million, respectively, as the carrying amount of the right-of-use assets related to the leases exceeded its fair value based on the Company’s estimate of future discounted cash flows related to the leased facility. During fiscal 2024, the non-cash charge of $11.0 million was recorded as an impairment of long-lived assets on the consolidated statements of operations and consisted of an $11.0 million impairment of operating lease right-of-use assets. See Note 6, Leases, for further details.PROPERTY AND EQUIPMENTProperty and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method. Depreciation is computed using the straight-line method over the service period of the related fixed asset as follows:Property and equipmentUseful LivesComputer equipment3 yearsFurniture and fixtures5 yearsCapitalized internal-use software3-7 yearsLeasehold improvementsLesser of estimated useful life or remaining lease termExpenditures for improvements that extend the physical or economic life of the property are capitalized. Construction in progress primarily relates to costs to acquire or internally develop internal-use software not fully completed as of March 31, 2024 and 2023.Maintenance, repairs, and ordinary replacements are charged to expense. Gains or losses on the disposition of property and equipment are recorded in the consolidated statements of operations.CAPITALIZED INTERNAL-USE SOFTWARE COSTSCertain costs of software are capitalized during the application development phase. The Company begins to capitalize costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be used as intended. 55Capitalized internal-use software development costs are included in property and equipment. Once the project has been completed, these costs are amortized to cost of service revenue on a straight-line basis over the estimated useful life of the related asset as noted in Property and Equipment.Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded in research and development expense. The Company tests capitalized internal-use software development costs for impairment on an annual basis, or as events occur or circumstances change that could impact the recoverability of the capitalized costs. ACCOUNTING FOR LONG-LIVED ASSETSThe Company reviews the recoverability of its long-lived assets, such as property and equipment, right-of-use assets, definite lived intangibles, or capitalized internal-use software costs, when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. Examples of such events could include the disposal of a significant portion of such asset, an adverse change in the market involving the business employing the related asset, or a significant change in the operation or use of an asset. The assessment of possible impairment is based on the Company's ability to recover the carrying value of the asset or asset group from the expected future cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate the fair value of long-lived assets and asset groups through future cash flows.GOODWILL AND OTHER INTANGIBLE ASSETSGoodwill represents the excess fair value of consideration transferred over the fair value of net assets acquired in business combinations. Goodwill and intangible assets with indefinite useful lives are not amortized but are tested annually for impairment and more often if there is an indicator of impairment. The Company performs testing for impairment of goodwill on an annual basis, or as events occur or circumstances change that would more likely than not reduce the fair value of the Company’s single reporting unit below its carrying amount. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.Intangible assets, consisting of acquired developed technology, domain names, and customer relationships, acquired in business combinations were initially measured at fair value and were determined to have definite lives. Thereafter, intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense related to developed technology is included in cost of revenue. Amortization expense related to customer relationships and domain names are included in sales and marketing expense. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable.CONVERTIBLE SENIOR NOTESIn accounting for the issuance of the 0.50% Convertible Senior Notes due 2024 and the 4.0% Convertible Senior Notes due 2028 (collectively, the "Notes"), the Company recorded the Notes as liabilities, as the conversion features do not require bifurcation and recognition as embedded derivatives.The excess of the principal amount of the liability over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes.The Company recorded the issuance costs as a reduction to the liability portion of the Notes, which are amortized as interest expense over the term of the Notes.WARRANT LIABILITIESWarrants to purchase shares of the Company's common stock are classified as a liability on the consolidated balance sheets and held at fair value, as the warrants contain certain terms that could result in cash settlement as a result of events outside of the Company’s control. The warrants are subject to remeasurement to fair value at each balance sheet date, and any change in fair value is recognized in the consolidated statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants.RESEARCH AND DEVELOPMENT EXPENSESResearch and development expenses consist primarily of personnel and related costs, third-party development and related work, software and equipment costs necessary for us to conduct our product and platform development and engineering efforts, and allocated information technology ("IT") and facilities costs. Research and development costs are expensed as incurred.ADVERTISING COSTSAdvertising costs are expensed as incurred and were $1.0 million, $1.5 million, and $3.4 million for the years ended March 31, 2024, 2023, and 2022, respectively.56FOREIGN CURRENCY TRANSLATIONThe Company has determined that the functional currency of each of its foreign subsidiaries is the subsidiary's local currency. The Company believes that this most appropriately reflects the current economic facts and circumstances of the subsidiaries' operations. The assets and liabilities of the subsidiaries are translated at the applicable exchange rate as of the end of the balance sheet period and revenue and expense amounts are translated at an average rate over the period presented. Resulting currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss within the stockholder's equity.SEGMENT INFORMATIONThe Company has determined that its chief executive officer is the chief operating decision maker (the "CODM"). The chief executive officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions the allocation of resources. The Company continued to conclude that it has one reporting unit, and it operates in a single reportable segment. FAIR VALUE OF FINANCIAL INSTRUMENTSThe Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal market or the most advantageous market in which it would transact.The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors that market participants would use in valuing the asset or liability developed based on the best information available in the circumstances.The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value by requiring that the most observable inputs be used when available. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:•    Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.•    Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).•    Level 3 applies to assets or liabilities for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including the Company's own assumptions.The estimated fair value of financial instruments is determined by the Company using available market information and valuation methodologies considered to be appropriate. The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate their fair values due to their short maturities. The Company's investments are recorded at fair value and the Notes and the Term Loan (as defined in Note 8, Convertible Senior Notes and Term Loan) are recorded at net carrying value.STOCK-BASED COMPENSATIONThe Company accounts for the fair value of restricted stock units (“RSUs”) using the closing market price of the Company’s common stock on the date of the grant. For new-hire grants and annual refresh grants, one-third of the RSUs typically vest on the first anniversary of the grant date, and the remainder vest on a one-eighth basis quarterly over the subsequent two years. Stock-based compensation cost for RSUs is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the requisite service period (generally the vesting period), net of forfeitures.The Company accounts for the fair value of performance stock units ("PSUs") using Monte Carlo simulations. The Company estimates the fair value of the rights to acquire stock under its 1996 Employee Stock Purchase Plan (the “ESPP”) using the Black-Scholes option pricing formula. The ESPP provides for consecutive six-month offering periods with a one-year look-back period and the Company uses its own historical volatility data in the valuation of shares that are purchased under the ESPP.57COMPREHENSIVE LOSSComprehensive loss, as defined, includes all changes in equity (net assets) during a period. The difference between net loss and comprehensive loss is due to foreign currency translation adjustments and unrealized gains or losses on investments classified as available-for-sale.NET LOSS PER SHAREBasic net loss per share is computed by dividing net loss available to common stockholders (numerator) by the weighted average number of vested, unrestricted common shares outstanding during the period (denominator). Diluted net loss per share is computed on the basis of the weighted average number of shares of common stock, plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method unless their effect is anti-dilutive. Dilutive potential common shares include outstanding stock options, ESPP, RSUs and PSUs.RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTSIn November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTEDOther recent accounting pronouncements that may be applicable to the Company are not expected to have a material impact on its present or future financial statements.2. REVENUE RECOGNITIONDisaggregation of RevenueThe Company disaggregates its revenue by geographic region. See Note 12, Geographical Information.Contract BalancesThe following table provides amounts of contract assets and deferred revenue from contracts with customers (in thousands):March 31, 2024March 31, 2023Contract assets, current (component of Other current assets)$9,453 $11,023 Contract assets, non-current (component of Other assets)7,879 10,570 Deferred revenue, current34,325 34,909 Deferred revenue, non-current7,810 10,615 Contract assets are recorded for contract consideration not yet invoiced but for which the performance obligations are completed. Contract assets, net of allowances for credit losses, are included in other current assets or other assets in the Company's consolidated balance sheets, depending on if their reduction will be recognized during the succeeding twelve-month period or beyond. As of March 31, 2023, the contract assets disclosed in the table have been updated to reflect the net balance, which accounts for allowances made for credit losses. The allowance applied to our contract assets as of March 31, 2024 and 2023 and the activity in this account, including the current-period provision for expected credit losses for the years ended March 31, 2024, 2023 and 2022, were not material.The change in contract assets was primarily driven by billing customers for amounts that had previously been recognized in revenue but not yet billed. During the year ended March 31, 2024, the Company recognized revenue of approximately $38.7 million that was included in deferred revenue at the beginning of the fiscal year.58Remaining Performance ObligationsThe Company's subscription terms typically range from one to five years. Contract revenue from the remaining performance obligations that had not yet been recognized as of March 31, 2024 was approximately $775.0 million. This amount excludes contracts with an original expected length of less than one year. The Company expects to recognize revenue on approximately 86% of the remaining performance obligations over the next 24 months and approximately 14% over the remainder of the subscription period. For purposes of this disclosure, the Company excludes contracts with an original expected length of less than one year.Deferred Sales Commission CostsAmortization of deferred sales commission costs for the years ended March 31, 2024, 2023, and 2022 was $40.2 million, $38.2 million, and $34.7 million, respectively. There were no material write-offs during the years ended March 31, 2024, 2023, and 2022.3. FAIR VALUE MEASUREMENTSCash, cash equivalents, and available-for-sale investments were as follows (in thousands):As of March 31, 2024AmortizedCostsGrossUnrealizedGainGrossUnrealized LossEstimatedFair ValueCash and Cash EquivalentsRestricted Cash(Current & Non-current)Short-TermInvestmentsCash$53,943 $— $— $53,943 $53,943 $— $— Level 1:Money market funds37,633 — — 37,633 37,172 461 — Subtotal91,576 — — 91,576 91,115 461 — Level 2:Term deposit25,147 — — 25,147 25,147 — — Commercial paper1,049 — (1)1,048 — — 1,048 Subtotal26,196 — (1)26,195 25,147 — 1,048 Total assets$117,772 $— $(1)$117,771 $116,262 $461 $1,048 As of March 31, 2023AmortizedCostsGrossUnrealizedGainGrossUnrealized LossEstimatedFair ValueCash and Cash EquivalentsRestricted Cash(Current & Non-current)Short-TermInvestmentsCash$95,828 $— $— $95,828 $95,828 $— $— Level 1:Money market funds8,935 — — 8,935 8,935 — — Treasury securities1,599 4 (1)1,602 — — 1,602 Subtotal106,362 4 (1)106,365 104,763 — 1,602 Level 2:Certificate of deposit1,329 — — 1,329 — 1,329 — Commercial paper8,610 — (2)8,608 6,637 — 1,971 Corporate debt22,625 55 (25)22,655 — — 22,655 Subtotal32,564 55 (27)32,592 6,637 1,329 24,626 Total assets$138,926 $59 $(28)$138,957 $111,400 $1,329 $26,228 The restricted cash component of the money market funds is comprised of letters of credit securing leases for certain office facilities.The Company considers its investments available to support its current operations and has classified investments in debt securities as available-for-sale securities. The Company does not intend to sell any of its investments that are in unrealized loss positions and, as of March 31, 2024, has determined that it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis.The Company regularly reviews the changes to the rating of its securities at the individual security level by rating agencies and reasonably monitors the surrounding economic conditions to assess the risk of expected credit losses. As of March 31, 2024, the Company did not record any allowance for credit losses on its investments.The Company uses the Black-Scholes option-pricing valuation model to value its detachable warrants from inception and at each reporting period. Changes in the fair values of the detachable warrants liability are recorded as loss on warrants remeasurement within Other (expense) income, net in the consolidated statements of operations.59The following table presents additional information about valuation techniques and inputs used for the Warrants (see Note 8, Convertible Senior Notes and Term Loan) that are measured at fair value and categorized within Level 3 as of March 31, 2024 and March 31, 2023 (dollars in thousands):March 31, 2024March 31, 2023Estimated fair value of detachable warrants$3,321 $5,497 Unobservable inputs:Stock volatility87.2 %67.2 %Risk-free rate4.3 %3.6 %Expected term3.4 years4.4 yearsAs of March 31, 2023, the estimated fair value of the 2024 Notes was $57.3 million, and as of March 31, 2024 and March 31, 2023 the estimated fair value of the Company's convertible senior notes due in 2028 was $161.7 million and $183.0 million, respectively (see Note 8, Convertible Senior Notes and Term Loan). The fair value of the convertible senior notes was determined based on the closing price of each of the securities on the last trading day of the reporting period, and each is Level 2 in the fair value hierarchy due to limited trading activity of the debt instruments. As of March 31, 2024 and 2023, the carrying value of the Company's Term Loan approximates its estimated fair value.4. FINANCIAL STATEMENT COMPONENTSAccounts receivable, net consisted of the following (in thousands): March 31, 20242023Trade accounts receivable$59,757 $63,501 Unbilled trade accounts receivable4,470 5,668 Less: allowance for credit losses(2,746)(3,644)Less: allowance for sales reserves(2,502)(3,218)Total accounts receivable, net$58,979 $62,307 Allowance for credit losses and sales reserves consisted of the following (in thousands): March 31, 20242023Credit LossesSales ReservesCredit LossesSales ReservesBeginning balance$(3,644)$(3,218)$(3,373)$(5,527)Provision (reserve)(1,969)(3,581)(3,255)(3,421)Recoveries (Write-offs)2,867 4,297 2,984 5,730 Ending balance$(2,746)$(2,502)$(3,644)$(3,218)Property and equipment, net consisted of the following (in thousands): March 31, 20242023Computer equipment$53,788 $56,106 Software development costs119,314 109,590 Software licenses14,562 10,175 Leasehold improvements29,666 33,269 Furniture and fixtures11,675 11,994 Construction in progress9,593 5,030 Total property and equipment238,598 226,164 Less: accumulated depreciation and amortization(185,417)(168,293)Total property and equipment, net$53,181 $57,871 Depreciation and amortization expense was $26.8 million, $36.8 million, and $42.1 million for the years ended March 31, 2024, 2023, and 2022, respectively.During the year ended March 31, 2023, the Company abandoned and wrote off certain internally-developed software with a net book value of $3.7 million.60Other current assets consisted of the following (in thousands): March 31, 20242023Prepaid expense$18,172 $18,546 Contract assets, current9,453 11,023 Other current assets7,633 5,061 Total other current assets$35,258 $34,630 Accrued and other liabilities consisted of the following (in thousands):March 31,20242023Accrued compensation$19,550 $29,614 Accrued taxes44,096 29,570 Other accrued liabilities14,456 14,556 Total accrued and other liabilities$78,102 $73,740 5. INTANGIBLE ASSETS AND GOODWILLThe carrying value of intangible assets consisted of the following:March 31, 2024March 31, 2023GrossCarryingAmountAccumulatedAmortizationNet CarryingAmountGrossCarryingAmountAccumulatedAmortizationNet CarryingAmountDeveloped technology$46,454 $(36,823)$9,631 $46,461 $(28,361)$18,100 Customer relationships105,827 (28,741)77,086 105,836 (16,824)89,012 Trade names and domains584 (584)— 584 (584)— Total acquired identifiable intangible assets$152,865 $(66,148)$86,717 $152,881 $(45,769)$107,112 As of March 31, 2024, the weighted average remaining useful life for developed technology and customer relationships were 1.5 years and 6.7 years, respectively.Amortization expense for related intangible assets was $20.4 million, $21.1 million, and $8.3 million for the years ended March 31, 2024, 2023, and 2022, respectively. There were no write-offs during the year ended March 31, 2024, and 2023. During the year ended March 31, 2022, the Company wrote off approximately $13.2 million of fully amortized intangible assets and the corresponding accumulated amortization. In November 2022, the Company sold certain intangible assets with net book value of less than $0.3 million for $1.8 million. The gain of approximately $1.8 million was recorded as Other income in the Consolidated Statement of Operations and includes $0.3 million to be received as future services.At March 31, 2024, annual amortization of intangible assets, based upon existing intangible assets and current useful lives, is estimated to be the following (in thousands):Amount2025$19,095 202613,896 202711,757 202811,044 2029 and thereafter30,925 Total$86,717 61The following table provides a summary of the changes in the carrying amounts of goodwill (in thousands): AmountBalance at March 31, 2022$266,867 Foreign currency translation(4)Balance at March 31, 2023266,863 Foreign currency translation(289)Balance at March 31, 2024$266,574 The Company conducted its annual impairment tests of goodwill in the fourth quarter of fiscal 2024, 2023, and 2022, and determined that no adjustment to the carrying value of goodwill was required.6. LEASESThe components of lease expense were as follows:For the years ended March 31,202420232022Operating lease expense$10,934 $12,030 $13,482 Variable lease expense$3,690 $6,378 $3,837 The supplemental cash flow information related to leases was as follows:For the years ended March 31,202420232022Cash outflows from operating leases$14,634 $18,985 $17,310 Right-of-use assets obtained in exchange for operating lease obligations$2,311 $3,777 $9,104 Short-term lease expense was immaterial during the years ended March 31, 2024 and 2023.The following table presents supplemental lease information:March 31, 2024March 31, 2023Weighted average remaining lease term6.2 years7.0 yearsWeighted average discount rate4.3%4.1%The following table presents maturity of lease liabilities under the Company's non-cancellable operating leases as of March 31, 2024:2025$13,737 202612,633 202711,331 202810,661 202910,487 Thereafter18,435 Total lease payments77,284 Less: imputed interest(9,342)Present value of lease liabilities$67,942 The Company continues to evaluate its leases for potential impairments. During the third quarter of fiscal 2024, in support of the Company's office-home hybrid workforce model, the Company's board of directors authorized the cessation of use of approximately 42% of leased space at the Company’s headquarters at 675 Creekside Way, Campbell, CA (the “Company’s Headquarters”). The Company ceased use of the space on November 2, 2023, and plans to continue to hold this space available for sublease. Additionally, the Company partially ceased use of office space for a certain international lease and does not plan to hold this available for sublease.The Company reviewed the recoverability of the related right-of-use asset and determined the changes in the intended use of these locations represented an impairment indicator, as these events indicated the carrying value of the right-of-use asset may not be recoverable. In connection with partially ceasing use of the Company’s Headquarters and an international office space, the Company recorded impairment charges of $9.9 million and $1.1 million, respectively, as the carrying amount of the right-of-use assets related to the leases exceeded its fair value based on the Company’s estimate of future discounted cash flows under 62the income approach. The fair value represented a Level 3 measurement and utilized certain unobservable inputs which required significant judgment and estimates, including estimated sublease income, temporary idling periods, discount rates and future cash flows based on the Company’s experience and assessment of existing market conditions. The estimation of sublease income is subject to uncertainty due to various factors, including market conditions, demand for the Company’s leased headquarters, the future financial stability of potential subtenants, market rent, any related free rent periods and uncertainties regarding demand for the commercial real estate market. Temporary idling periods are difficult to predict accurately and may arise due to unforeseen circumstances, such as availability of new tenants, economic downturns, or changes in commercial real estate market conditions. The estimated discount rate of 11% is influenced by various factors, including prevailing interest rates, credit risk, tenor, and sub-lease specific characteristics. The estimated future cash flows were calculated by factoring in the approximated sublease income, temporary idling periods, and discount rates to determine the Level 3 fair value measurement. The Company performed a sensitivity analysis and determined that variations in the aforementioned assumptions do not materially impact the Company’s fair value measurement. During fiscal 2024, the non-cash charge of $11.0 million was recorded as an impairment of long-lived assets on the consolidated statements of operations and consisted of an $11.0 million impairment of operating lease right-of-use assets.During fiscal 2023, certain leases were impaired, and as a result, $2.7 million of right-of-use assets were written off.7. COMMITMENTS AND CONTINGENCIESIndemnificationsIn the normal course of business, the Company may agree to indemnify other parties, including customers, lessors, and parties to other transactions with the Company with respect to certain matters, such as breaches of representations or covenants or intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors.It is not possible to determine the maximum potential amount of the Company's exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on the Company's operating results, financial position, or cash flows. Under some of these agreements, however, the Company's potential indemnification liability might not have a contractual limit.Operating LeasesThe Company's lease obligations consist of the Company's principal facility and various leased facilities under operating lease agreements. See Note 6, Leases, for more information on the Company's leases and the future minimum lease payments.Purchase ObligationsThe Company's purchase obligations include contracts with third-party customer support vendors and third-party network service providers. These contracts include minimum monthly commitments and the requirements to maintain the service level for several months. During the year ended March 31, 2024, the Company entered into a $28.1 million noncancellable three-year hosting service contract. During the three months ended December 31, 2023, the Company placed an additional $1.0 million order to the existing noncancellable three-year hosting service contract. The updated commitment of $11.4 million remains due during fiscal 2025 and $10.1 million will be due during fiscal 2026.The total contractual minimum commitments were approximately $61.2 million as of March 31, 2024.Legal ProceedingsThe Company may be involved in various claims, lawsuits, investigations, and other legal proceedings, including intellectual property, commercial, regulatory compliance, securities, and employment matters that arise in the normal course of business. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company regularly evaluates current information to determine whether any accruals should be adjusted and whether new accruals are required. Actual claims could settle or be adjudicated against the Company in the future for materially different amounts than the Company has accrued due to the inherently unpredictable nature of litigation. Legal costs are expensed as incurred.The Company believes it has recorded adequate provisions for any such lawsuits and claims and proceedings as of March 31, 2024. The Company believes that damage amounts claimed in these matters are not meaningful indicators of potential liability. Some of the matters pending against the Company involve potential compensatory, punitive, or treble damage claims or sanctions, that, if granted, could require the Company to pay damages or make other expenditures in amounts that could have a material adverse effect on its Consolidated Financial Statements. Given the inherent uncertainties of litigation, the ultimate outcome of the ongoing matters described herein cannot be predicted, and the Company believes it has valid defenses with respect to the legal matters pending against it. Nevertheless, the Consolidated Financial Statements could be materially adversely affected in a particular period by the resolution of one or more of these contingencies.63State and Local Taxes and SurchargesFrom time to time, the Company has received inquiries from a number of state and local taxing agencies with respect to the remittance of sales, use, telecommunications, excise, and income taxes. Several jurisdictions currently are conducting tax audits of the Company's records. The Company collects and/or accrues for all taxes and surcharges that it believes are required. The amounts that have been remitted have historically been within the accruals established by the Company. The Company conducts periodic reviews of the taxability of its services with respect to sales, use, telecommunications or other similar indirect taxes and adjusts its accrual when facts relating to specific exposures warrant such adjustment. A similar review was performed on the taxability of services provided by Fuze and it was determined that certain services may be subject to sales, use, telecommunications or other similar indirect taxes in certain jurisdictions. Based on such assessments, as of March 31, 2024 and 2023, the Company had accrued contingent indirect tax liabilities of $19.2 million and $13.5 million, respectively.FCC Investigation of 8x8, Inc. and Fuze, Inc.On November 17, 2023, the Company received a letter of inquiry from the Enforcement Bureau of the Federal Communications Commission (the “FCC”) requesting certain information and supporting documents related to an investigation of potential violations by 8x8 and Fuze in connection with certain prior period regulatory filings and payments. The Company has cooperated with the FCC in this matter and responded to the letter of inquiry. If the FCC were to pursue separate action against the Company, the FCC could seek to fine or impose regulatory penalties or civil liability on the Company. The Company received a Universal Service Administrative Company ("USAC") letter dated February 1, 2024 rejecting Fuze’s previously filed 499-A returns for calendar years 2021 and 2022 and informing the Company that USAC would apply the safe harbor to Fuze revenues for those years for assessing Universal Service Fund ("USF") payments. The Company subsequently received an invoice from USAC dated March 22, 2024 in the amount of $14.9 million for additional USF fees owed for those calendar years by Fuze, Inc. The Company has since refiled the 499-A returns for calendar years 2021 and 2022 for Fuze, Inc. and recorded an additional liability of $5.6 million, which the Company has since paid subsequent to March 31, 2024. The Company submitted an appeal to USAC of the remaining amount of the invoice dated March 22, 2024. The Company's appeal is ongoing and the Company continues to cooperate with the FCC's investigation of this matter.8. CONVERTIBLE SENIOR NOTES AND TERM LOAN2024 NotesAs of March 31, 2023, the Company had $63.3 million aggregate principal amount of 0.50% convertible senior notes due 2024 (the "2024 Notes") in a private placement, including the exercise in full of the initial purchasers' option to purchase additional notes. In August 2022, the Company used the proceeds from the issuance of the Term Loan (as defined below) to fund the cash portion of an exchange of the Company’s approximately $403.8 million aggregate principal amount of the 2024 Notes for cash plus approximately $201.9 million aggregate principal amount of the 2028 Notes (as defined below), and the concurrent repurchase of approximately $60.0 million of the Company’s common stock with the counterparties to such exchange.The 2024 Notes are senior unsecured obligations of the Company, and interest is payable semiannually in arrears on February 1 and August 1 of each year. The 2024 Notes matured and were paid off in full on February 1, 2024 and the Company was in compliance with all covenants set forth in the indenture governing the 2024 Notes.Repayment of 2024 NotesIn addition to the Exchange Transaction, the Company completed three repurchases of the 2024 Notes during fiscal 2023 for a total of approximately $32.9 million in aggregate principal amount.On September 28, 2022, the Company repurchased an aggregate principal amount of $6.0 million of the 2024 Notes through a privately negotiated transaction with one of the remaining 2024 Notes holders for an aggregate purchase price of $5.3 million. The aggregate purchase price was paid in cash and only partially settled the outstanding 2024 Notes with the holder; accordingly, the repurchase consideration was accounted for as a debt modification with no extinguishment gain or loss.On December 9, 2022, the Company repurchased an aggregate principal amount of $21.8 million of the 2024 Notes through privately negotiated transactions with two of the remaining 2024 Notes holders for an aggregate purchase price of $20.1 million in cash. The repurchase consideration was accounted for as a debt extinguishment, resulting in a $2.1 million gain.On February 23, 2023, the Company repurchased an aggregate principal amount of $5.0 million of the 2024 Notes through a privately negotiated transaction with one of the remaining 2024 Notes holders for an aggregate purchase price of $4.7 million in cash. The repurchase consideration was accounted for as a debt extinguishment, resulting in a $0.3 million gain.On February 1, 2024, the Company paid the remaining aggregate principal of $63.3 million, and accrued interest of $0.2 million, related to the 2024 Notes, which matured on February 1, 2024.64The following table presents the net carrying amount and fair value of the liability component of the 2024 Notes:March 31, 2024March 31, 2023Principal$— $63,295 Unamortized debt discount and issuance costs— (363)Net carrying amount$— $62,932 The debt discount and debt issuance costs are amortized to interest expense over the term of the 2024 Notes at an effective interest rate of 1.2%.Interest expense recognized related to the 2024 Notes was as follows:Year Ended March 31, 202420232022Contractual interest expense$265 $1,177 $2,271 Amortization of debt discount and issuance costs363 1,694 20,404 Total interest expense$628 $2,871 $22,675 Term Loan and WarrantsOn August 10, 2022, the Company borrowed $250.0 million in a senior secured term loan facility (the “Term Loan”) under a term loan credit agreement (the “Credit Agreement”) entered into on August 3, 2022 with Wilmington Savings Fund Society, FSB, as administrative agent, and certain affiliates of Francisco Partners (“FP”), with aggregate debt issuance costs and discount of approximately $20.0 million, including $2.8 million paid in the form of shares of the Company's common stock. The Term Loan matures on August 3, 2027 and will initially bear interest at an annual rate equal to the term Standard Overnight Financing Rate (which will be subject to a floor of 1.00% and a credit spread adjustment of 0.10%), plus a margin of 6.50%.The obligations under the Credit Agreement will be guaranteed by the Company’s wholly-owned subsidiaries, subject to certain customary exceptions, and secured by a perfected security interest in substantially all of the Company’s tangible and intangible assets, as well as substantially all of the tangible and intangible assets of the guarantors.Mandatory prepayments of the Term Loan are required to be made upon the occurrence of certain events, including, without limitation, (i) sales of certain assets, (ii) receipt of certain casualty and condemnation awards proceeds, and (iii) the incurrence of non-permitted indebtedness, subject to certain thresholds and reinvestment rights. Voluntary prepayments are permitted at any time, subject to certain prepayment premiums. The company was permitted to prepay $25.0 million without a penalty, which it did on May 5, 2023. The prepayment penalty of 2% on additional early prepayment of principal expires August 3, 2024.The Credit Agreement contains a minimum adjusted cash Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) financial covenant, a minimum liquidity covenant and a maximum secured leverage ratio financial covenant and contains affirmative and negative covenants customary for transactions of this type, including limitations with respect to indebtedness, liens, investments, dividends, disposition of assets, change in business, and transactions with affiliates.The Company used the proceeds from the issuance of the Term Loan to fund the cash portion of an exchange of the Company’s approximately $403.8 million principal amount of the 2024 Notes for cash plus approximately $201.9 million of the 2028 Notes (defined below), and the concurrent repurchase of approximately $60.0 million of the Company’s common stock with the counterparties to such exchange.In connection with the Credit Agreement, the Company issued detachable warrants (the “Warrants”) to affiliates of FP to purchase an aggregate of 3.1 million shares of the Company’s common stock with a five-year term and an exercise price of $7.15 per share (subject to adjustment) that represents a 27.5% premium over the closing price per share of the Company’s common stock on August 3, 2022. The Warrants are classified as liabilities as the Warrants contain certain terms that could result in cash settlement as a result of events outside of the Company’s control. Accordingly, the Company recognizes the Warrants as liabilities at fair value initially and adjusts the Warrants to fair value at each reporting period. The fair value of the Warrants was $5.9 million upon issuance, and $3.3 million at March 31, 2024, and was recorded within Other liabilities, non-current on the consolidated balance sheets with a corresponding debt discount recorded against the Term Loan. The subsequent changes in fair value were recorded through Other income (expense), net on the Company’s consolidated statement of operations.The debt discount and debt issuance costs are amortized to interest expense over the term of the Term Loan at an effective interest rate of 11.9%. 65The following table presents the net carrying amount of the Term Loan:March 31, 2024March 31, 2023Principal$225,000 $250,000 Unamortized debt discount and issuance costs(13,106)(18,007)Net carrying amount$211,894 $231,993 Interest expense recognized related to the Term Loans was as follows:Year Ended March 31, 20242023Contractual interest expense$27,022 $17,816 Amortization of debt discount and issuance costs3,135 2,012 Total Interest expense$30,157 $19,828 Exchange Transaction and 2028 NotesExchange TransactionOn August 11, 2022, the Company issued approximately $201.9 million aggregate principal amount of its 4.00% convertible senior notes due 2028 (the “2028 Notes”), pursuant to an indenture, dated as of August 11, 2022 (the “2028 Notes Indenture”), by and between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”). The Company used the proceeds from the issuance of the 2028 Notes, together with approximately $181.8 million in cash consideration from borrowing of the Term Loan, in exchange for approximately $403.8 million aggregate principal amount of the Company’s outstanding 2024 Notes pursuant to privately negotiated agreements (the “Exchange Agreements”) with a limited number of existing holders of the 2024 Notes (the “Exchange Transaction”). In connection with the Exchange Transaction, the Company purchased an aggregate of approximately $60.0 million of the Company’s common stock in privately negotiated transactions from existing holders of the 2024 Notes who participated in the Exchange Transaction.The Exchange Transaction was treated as a debt extinguishment. The difference between the consideration used to extinguish the 2024 Notes and the carrying value of the 2024 Notes (including unamortized debt discount and issuance costs) subject to the Exchange Transaction resulted in an extinguishment gain of $16.1 million recorded through Other income (expense), net on the Company’s consolidated statement of operations.The Capped Calls were not modified or settled as part of the Exchange Transaction and continued to be classified in stockholders' equity as long as they continued to meet the conditions for equity classification. These were subsequently unwound in February 2023.2028 NotesAs part of the Exchange Transaction, the Company issued $201.9 million aggregate principal amount of the 2028 Notes, with debt issuance costs of approximately $5.6 million, of which 50% was paid in the form of shares of the Company's common stock.The 2028 Notes are senior obligations of the Company that accrue interest, payable semi-annually in arrears on February 1 and August 1 of each year, commencing on February 1, 2023. The 2028 Notes will mature on February 1, 2028, unless earlier converted, redeemed or repurchased. The initial conversion rate is 139.8064 shares of the Company’s common stock per $1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of approximately $7.15 per share), subject to customary adjustments. Upon conversion of the 2028 Notes, the Company may elect to satisfy the conversion obligation by cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s stock.Prior to the close of business on the business day immediately preceding November 15, 2027, the 2028 Notes will be convertible only under the following circumstances:1.At any time during any fiscal quarter commencing after the fiscal quarter ending on December 31, 2022 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;2.During the five business day period immediately after any five consecutive trading day period (the measurement period), if the trading price per $1,000 principal amount of the 2028 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;3.If the Company calls any or all of the 2028 Notes for redemption prior to the close of business on the business day immediately preceding November 15, 2027; or4.Upon the occurrence of specified corporate events (as set forth in the 2028 Notes Indenture).66On or after November 15, 2027, holders of the 2028 Notes may convert their 2028 Notes at their option at any time until the close of business on the second Scheduled Trading Day immediately preceding the maturity date.Under the terms of the 2028 Notes, the Company cannot redeem the 2028 Notes prior to August 6, 2025. On or after August 6, 2025, the Company may, at its option, redeem for cash all or any portion of the 2028 Notes at a redemption price equal to 100% of the principal amount, plus accrued unpaid interest, only upon the satisfaction of certain conditions and during certain periods, including if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice.If a fundamental change (as defined in the 2028 Notes Indenture) occurs at any time prior to February 1, 2028, holders of 2028 Notes may require the Company to repurchase for cash all or any portion of their 2028 Notes at a repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. In addition, in connection with certain corporate events or if the Company issues a notice of redemption, a fundamental change will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2028 Notes in connection with such corporate event or during the relevant redemption period.The 2028 Notes Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or holders of no less than 25% in aggregate principal amount of the 2028 Notes then outstanding may declare the entire principal amount of all the 2028 Notes, and the interest accrued on such 2028 Notes, if any, to become immediately due and payable. Upon events of default in connection with specified bankruptcy events involving the Company, the 2028 Notes will become due and payable immediately.The debt discount and debt issuance costs are amortized to interest expense over the term of the 2028 Notes at an effective interest rate of 4.7%.The following table presents the net carrying amount of the 2028 Notes:March 31, 2024March 31, 2023Principal$201,914 $201,914 Unamortized debt discount and issuance costs(4,118)(5,093)Net carrying amount$197,796 $196,821 Interest expense recognized related to the 2028 Notes was as follows:Year Ended March 31,20242023Contractual interest expense$8,065 $4,027 Amortization of debt discount and issuance costs974 548 Total interest expense$9,039 $4,575 9. STOCK-BASED COMPENSATION AND STOCKHOLDERS' EQUITY2012 Equity Incentive PlanIn June 2012, the Company's board of directors approved the 2012 Equity Incentive Plan (the "2012 Plan"). The Company's stockholders subsequently adopted the 2012 Plan in July 2012, which became effective in August 2012. The Company reserved 4.1 million shares of the Company's common stock for issuance under this plan. In August 2014, 2016, 2018 and 2019, the 2012 Plan was amended to allow for an additional 6.8 million shares, 4.5 million shares, 16.3 million shares, and 12.0 million shares reserved for issuance, respectively. The 2012 Plan provided for granting incentive stock options to employees and non-statutory stock options to employees, directors or consultants, and granting of stock appreciation rights, restricted stock, restricted stock units and performance units, qualified performance-based awards, and stock grants. The stock option price of incentive stock options granted was not permitted to be less than the fair market value on the effective date of the grant. Other types of options and awards under the 2012 Plan could be granted at any price approved by the administrator. Options, restricted stock, and restricted stock units generally vest over three or four years and expire ten years after grant. The 2012 Plan expired in June 2022. As of March 31, 2024, there were no shares available for future grants under the 2012 Plan. 2013 New Employee Inducement Incentive PlanIn September 2013, the Company's board of directors approved the 2013 New Employee Inducement Incentive Plan (the "2013 Plan"). The Company reserved 1.0 million shares of the Company's common stock for issuance under this plan. In November 2014, the 2013 Plan was amended to allow for an additional 1.2 million shares reserved for issuance. In July 2015, the 2013 Plan was amended to allow for an additional 1.2 million shares reserved for issuance. In connection with its approval of the August 2016 amendments to the 2012 Plan, the Company's board of directors has approved the suspension of future grants under the 2013 Plan, which became effective immediately upon stockholder approval of the proposed 2012 Plan amendments in 67August 2016. In addition, the 2013 Plan was amended to reduce the number of shares reserved for issuance under the 2013 Plan to the number of shares that were then subject to outstanding awards under the 2013 Plan, leaving no shares available for future grant. The 2013 Plan provided for granting non-statutory stock options, stock appreciation rights, restricted stock, restricted stock and performance units, and stock grants solely to newly hired employees as a material inducement to accepting employment with the Company. Options were granted at market value on the grant date under the 2013 Plan, unless determined otherwise at the time of grant by the administrator. Grants generally vested over four years and expire ten years after grant.2017 New Employee Inducement Incentive PlanIn October 2017, the Company's board of directors approved the 2017 New Employee Inducement Incentive Plan (the "2017 Plan"). The Company reserved 1.0 million shares of the Company's common stock for issuance under this plan. In January 2018, the 2017 Plan was amended to allow for an additional 1.5 million shares to be reserved for issuance. In December 2020, the 2017 Plan was further amended to allow for an additional 1.4 million shares to be reserved for issuance. In February 2022, the 2017 Plan was further amended to allow for an additional 1.5 million shares to be reserved for issuance. In February 2024, the 2017 Plan was further amended to allow for an additional 0.8 million shares to be reserved for issuance. The 2017 Plan provides for granting non-statutory stock options, stock appreciation rights, restricted stock, and performance units and stock grants solely to newly hired employees as a material inducement to accepting employment with the Company. Options are granted at market value on the grant date under the 2017 Plan, unless determined otherwise at the time of grant by the administrator, which generally will be the compensation committee of the board of directors. Grants generally vest over three years and expire ten years after grant. As of March 31, 2024, 0.2 million shares remained available for future grants under the 2017 plan.2022 Equity Incentive PlanOn May 26, 2022, the Company's board of directors approved the 2022 Equity Incentive Plan (the "2022 Plan"). The Company's stockholders subsequently approved the 2022 Plan on July 12, 2022. The Company reserved 8.0 million shares of the Company's common stock for issuance under the 2022 Plan plus the number of shares subject to awards that were outstanding under the 2012 Plan (as defined below) as of 12:01 a.m. Pacific Time on June 22, 2022 (the “Prior Plan Expiration Time”), to the extent that, after the Prior Plan Expiration Time, such shares would have recycled back to the 2012 Plan in connection with the awards’ expiration, termination, cancellation, forfeiture, or repurchase, and in each case, subject to adjustment upon certain changes in the Company’s capitalization. The 2022 Plan provides for the granting of incentive stock options to employees and non-statutory stock options to employees, directors or consultants, and granting of stock appreciation rights, restricted stock, restricted stock units and performance units, and stock grants. The stock option price of incentive stock options granted cannot be less than the fair market value on the effective date of the grant. Options, restricted stock, and restricted stock units generally vest over three or four years and expire ten years after the grant. As of March 31, 2024, 2.6 million shares remained available for future grants under the 2022 Plan.Stock-Based CompensationThe following table presents stock-based compensation expense (in thousands): Years Ended March 31, 202420232022Cost of service revenue$4,993 $9,236 $8,815 Cost of other revenue1,918 3,531 4,717 Research and development24,112 29,581 32,655 Sales and marketing15,271 24,921 47,202 General and administrative15,616 22,267 39,942 Total$61,910 $89,536 $133,331 Stock OptionsThere were no options exercised in the year ended March 31, 2024. The options cancelled in the years ended March 31, 2024, 2023 and 2022, were 0.3 million, 0.2 million and 31.0 thousand, respectively. The options outstanding as of March 31, 2024, 2023 and 2022, were 0.4 million, 0.7 million and 0.9 million, respectively. The total intrinsic value of options exercised in the years ended March 31, 2023, and 2022, was $40.0 thousand and $15.3 million, respectively.As of March 31, 2024, there was no unrecognized compensation cost related to stock options.The Company did not grant any stock options during fiscal years 2024, 2023, or 2022.68Stock Purchase RightsThere were no activities related to stock purchase rights during the years ended March 31, 2024, 2023, and 2022.As of March 31, 2024, there was no unrecognized compensation cost related to stock purchase rights.Restricted Stock UnitsThe following table presents the RSU activity during the years ended March 31, 2024, 2023, and 2022 (shares in thousands):Number of SharesWeighted Average Grant Date Fair ValueWeighted Average Remaining Contractual Term (in Years)Balance at March 31, 20218,646 $19.27 1.85Granted8,333 21.37 Vested and released(5,146)19.82 Forfeited(2,458)20.85 Balance at March 31, 20229,375 20.41 2.11Granted13,297 5.71 Vested and released(5,275)19.18 Forfeited(4,404)12.46 Balance at March 31, 202312,993 8.56 1.84Granted7,186 3.85 Vested and released(7,613)8.87 Forfeited(2,241)7.13 Balance at March 31, 202410,325 $5.36 1.75As of March 31, 2024, there was $38.6 million of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted average of 1.75 years.Performance Stock UnitsPSUs are issued to a group of executives with vesting that is contingent on a combination of stock performance and continued service. The PSUs generally vest over periods ranging from one to four years based on Total Shareholder Return ("TSR"), as measured relative to specified market indices during the period from grant date through vesting date, or on the achievement of specific pre-established absolute stock price hurdles. For PSU awards that allow for performance above or below target, actual PSU vesting amounts are based on performance measured against pre-established threshold, target and maximum performance levels, based either on relative TSR performance or achievement of specific pre-established absolute stock price hurdles. All PSU awards vest at the end of the respective performance periods for those executives with continued service.69The following table presents the PSU activity during the years ended March 31, 2024, 2023, and 2022 (shares in thousands):Number of SharesWeighted Average Grant Date Fair ValueWeighted Average Remaining Contractual Term (in Years)Balance at March 31, 20211,576 $27.33 1.24Granted497 30.41 Granted for performance achievement(1)20 30.41 Vested and released(250)17.15 Forfeited(817)23.45 Balance at March 31, 20221,026 35.36 0.89Granted853 7.31 Granted for performance achievement(1)24 7.31 Vested and released(128)25.65 Forfeited(1,151)28.11 Balance at March 31, 2023624 11.30 1.45Granted2,023 3.25 Forfeited(116)21.83 Balance at March 31, 20242,531 $4.38 1.16(1) Represents additional PSUs awarded as a result of the achievement of performance goals above the performance targets established at grant.Total unrecognized compensation cost related to PSUs was $3.7 million as of March 31, 2024, which is expected to be recognized over a weighted average of 1.16 years.The PSUs granted were valued for compensation expense purposes at weighted average share price determined by the Monte Carlo simulations using volatility factors and risk-free rates as follows:Year Ended March 31,Value per Weighted Average ShareVolatility RangeRisk-Free Interest Rate Range2024$3.25 68.85%—68.97%4.03%—4.08%2023$7.05 51.96%—69.30%3.15%—4.42%2022$30.98 58.65%—59.67%0.34%—0.40%1996 Employee Stock Purchase PlanThe Company's Amended and Restated 1996 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") was adopted in June 1996 and became effective upon the closing of the Company's initial public offering in July 1997. In May 2006, the Company's board of directors approved a ten-year extension of the Employee Stock Purchase Plan. Stockholders approved the ten-year extension of the Employee Stock Purchase Plan at the 2006 Annual Meeting of Stockholders held September 2006. The Company's board of directors then approved the Second Amended and Restated 1996 Stock Purchase Plan in May 2017 which (i) eliminated the expiration date of the plan and (ii) approved a ten-year “evergreen provision” which would increase annually the number of shares available for issuance by up to 0.5 million on the first day of each fiscal year. Stockholders approved these changes in August 2017. In May 2020, the Company’s board of directors approved the Amended and Restated 1996 Employee Stock Purchase Plan which (i) eliminated the “evergreen provision” and (ii) reserved for issuance 3.0 million additional shares. At the 2020 Annual Meeting of Stockholders in August 2020, these changes were approved. As a result of these amendments, the Employee Stock Purchase Plan is effective until terminated by the Company's board of directors. In May 2022, the Company's board of directors approved amendments to the Employee Stock Purchase Plan, including an amendment that reserved for issuance of an additional 3.6 million shares, which were approved by the stockholders in July 2022 at the 2022 Annual Meeting. During fiscal 2024, 2023 and 2022, approximately 1.9 million, 1.1 million, and 0.7 million shares, respectively, were issued under the Amended and Restated Employee Stock Purchase Plan.70The Employee Stock Purchase Plan permits eligible employees to purchase common stock through payroll deductions at a price equal to 85% of the fair market value of the common stock at the beginning of each one-year offering period or the end of each six-month purchase period, whichever is lower. When the Employee Stock Purchase Plan was reinstated in fiscal 2005, the offering period was reduced from two years to one year. Commencing with the purchase period beginning in August 2020, the contribution amount may not exceed 20% of an employee's base compensation, including commissions and standard incentive cash bonuses, but not including non-standard bonuses and overtime wages. Prior to the August 2020 purchase period, the contribution amount was limited to 10% of an employee's base compensation, including commissions, but not including bonuses and overtime wages. In the event of a merger of the Company with or into another corporation or the sale of all or substantially all of the assets of the Company, the Employee Stock Purchase Plan provides that a new exercise date will be set for each purchase right under the plan which exercise date will occur before the date of the merger or asset sale.As of March 31, 2024, there was approximately $2.5 million of unrecognized compensation cost related to employee stock purchases. This cost is expected to be recognized over a weighted average period of 0.4 years.The estimated fair value of stock purchase rights granted under the Employee Stock Purchase Plan was estimated using the Black-Scholes pricing model with the following weighted-average assumptions: Years Ended March 31, 202420232022Expected volatility75%72%45%Expected dividend yield———Risk-free interest rate5.26%3.30%0.57%Weighted average expected term0.8 years0.8 years0.8 yearsWeighted average fair value of rights granted$1.31$2.09$5.81Stock RepurchasesIn May 2017, the Company's board of directors authorized the Company to purchase $25.0 million of its common stock from time to time under the 2017 Repurchase Plan (the "Repurchase Plan"). The Repurchase Plan expires when the maximum purchase amount is reached, or upon the earlier revocation or termination by the Company's board of directors. The remaining amount available under the Repurchase Plan as of March 31, 2024 was approximately $7.1 million.In December 2021, in a private placement, the Company's board of directors authorized the Company to repurchase approximately $45.0 million of its common stock from certain qualified investors in connection with the issuance of $137.5 million in additional aggregate principal amount of the 2024 Notes. In August 2022, the Company repurchased in privately negotiated transactions with a limited number of holders 10,695,000 shares of its common stock for approximately $60.0 million, in connection with the Exchange Transaction and negotiation of the Term Loan, as further described in Note 8, Convertible Senior Notes and Term Loan.10. INCOME TAXESFor the years ended March 31, 2024, 2023, and 2022, the Company recorded a provision (benefit) for income taxes of $3.6 million, $2.8 million, and $(0.4) million, respectively. The components of the consolidated provision for income taxes for fiscal 2024, 2023, and 2022 consisted of the following: March 31,Current:202420232022Federal$714 $423 $— State2,384 1,331 145 Foreign544 1,053 721 Total current tax provision3,642 2,807 866 DeferredFederal— — (984)State— — (269)Total deferred tax provision— — (1,253)Income tax provision (benefit)$3,642 $2,807 $(387)The Company's income from continuing operations before income taxes included $2.6 million, $2.7 million, and $12.9 million of foreign subsidiary income for the years ended March 31, 2024, 2023, and 2022, respectively. The Company is permanently reinvesting the earnings of its profitable foreign subsidiaries to facilitate expansion of overseas operations. If the Company were to remit these earnings, the tax impact would be immaterial.71For the year ended March 31, 2022, the Company recorded a deferred tax benefit of $1.2 million related to the release of an existing valuation allowance as a result of change in circumstances caused by the acquisition of Fuze.Deferred tax assets and (liabilities) were comprised of the following: March 31, 20242023Deferred tax assets:Net operating loss carryforwards$296,036 $317,035 Research and development and other credit carryforwards28,118 29,237 Stock-based compensation7,540 9,257 Reserves and allowances17,463 16,050 Operating lease liability15,456 18,236 Capitalized IRC 174 costs51,317 31,207 Fixed assets and intangibles6,435 5,728 Gross deferred tax assets422,365 426,750 Valuation allowance(368,408)(360,274)Total deferred tax assets$53,957 $66,476 Deferred tax liabilities:Intangibles(19,045)(23,781)Deferred sales commissions(26,303)(30,607)Operating lease, right-of-use asset(8,724)(12,202)Net deferred taxes$(115)$(114)The Company assesses the realizability of deferred tax assets based on the available evidence, including a history of taxable income and estimates of future taxable income. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of deferred tax assets will not be realized. For the year ended March 31, 2024, the Company continues to maintain a full valuation allowance against its deferred tax assets as it considered the cumulative losses in recent periods to be substantial negative evidence. At March 31, 2024, management determined that a valuation allowance of approximately $368.4 million was needed, compared with approximately $360.3 million as of March 31, 2023.At March 31, 2024, the Company had federal net operating loss carryforwards of approximately $1,118.7 million, of which $335.5 million are related to years prior to fiscal 2019 and begin to expire in 2034. The remaining $783.2 million carry forward indefinitely, but can only be used to apply to 80% of the Company’s taxable income for a given tax year. As of March 31, 2024, the Company also had state net operating loss carry-forwards of $915.8 million, the majority of which expire at various dates between 2025 and 2043. The usage of net operating loss carryforwards are subject to certain Internal Revenue Code Section 382 limitations. In addition, at March 31, 2024, the Company had research and development credit carryforwards for federal and California tax reporting purposes of approximately $16.8 million and $23.4 million, respectively. The federal income tax credit carryforwards will expire at various dates between 2035 and 2044, while the California income tax credits will carry forward indefinitely. A reconciliation of the Company's provision (benefit) for income taxes to the amounts computed using the statutory United States federal income tax rate is as follows: Years Ended March 31, 202420232022Tax benefit at statutory rate$(13,429)$(15,075)$(36,909)State income taxes before valuation allowance, net of federal effect(2,821)(3,088)(7,754)Foreign tax rate differential(8)492 (2,056)Research and development credits714 (2,513)(3,362)Change in valuation allowance7,908 (1,708)49,620 Compensation/option differences8,449 16,858 (6,788)Non-deductible compensation2,612 4,397 7,606 Other217 3,444 (744)Total income tax provision (benefit)$3,642 $2,807 $(387)For the years ended March 31, 2024, 2023, and 2022, the statutory federal rate was 21%.72The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Years ended March 31, 202420232022Balance at beginning of year$10,113 $9,850 $7,053 Gross increases - tax positions in prior period1,457 163 1,918 Gross increases - tax positions related to the current year431 158 951 Gross decreases - tax positions in prior period(337)— — Settlements(287)— (63)Lapse of statute of limitations(512)(34)(19)Currency(54)(24)10 Balance at end of year$10,811 $10,113 $9,850 At March 31, 2024, the Company had unrecognized tax benefits of $10.8 million, all of which, if recognized, would favorably affect the Company's effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.The Company's policy for recording interest and penalties associated with tax examinations is to record such items as a component of operating expense income before taxes. For the year ended March 31, 2024 and 2023, the Company recognized $0.2 million and $0.1 million, respectively, in penalty and interest related to unrecognized tax benefits.Utilization of the Company's net operating loss and tax credit carryforwards can become subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss and tax credit carryforwards before utilization. The Company has performed an analysis of its changes in ownership under Section 382 of the Internal Revenue Code as well as with respect to the net operating loss and tax credit carryforwards inherited as part of the Fuze acquisition. The Company currently expects the Section 382 limitation to apply with respect to the Fuze carryforwards and limit the Company’s ability to fully utilize the Fuze net operating loss carryforwards, prior to their expiration.The Company files United States federal and state income tax returns in jurisdictions with varying statutes of limitations. Due to the Company’s net operating loss and tax credit carryforwards, the fiscal years 2003 and forward generally remain subject to examination by federal and most state tax authorities.11. NET LOSS PER SHAREThe following is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net loss per share (in thousands, except per share data): For the years ended March 31, 202420232022Net loss$(67,592)$(73,143)$(175,383)Weighted average common shares outstanding - basic and diluted121,106 115,959 113,354 Net loss per share - basic and diluted$(0.56)$(0.63)$(1.55)As the Company was in a loss position for all periods presented, basic net loss per share is equivalent to diluted net loss per share for all periods, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. The following potentially weighted-average common shares were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive (shares in thousands): For the years ended March 31, 202420232022Stock options497 685 867 Restricted stock units and Performance stock units7,396 13,617 10,401 Potential shares attributable to the ESPP1,446 1,261 761 Warrants to purchase common stock— 3,100 — Total anti-dilutive shares9,339 18,663 12,029 7312. GEOGRAPHICAL INFORMATIONThe following tables set forth the geographic information for each period (in thousands):Years Ended March 31, 202420232022United States$507,507 $536,678 $443,118 United Kingdom121,920 107,585 91,192 Other International99,278 99,675 103,820 Total revenue$728,705 $743,938 $638,130 March 31, 20242023United States$49,992 $54,191 International3,189 3,680 Total property and equipment, net$53,181 $57,871 13. RELATED PARTY TRANSACTIONSThe Company has been doing business with an outside sales and marketing vendor since December 2017, which became a related party in July 2022 when a member of the Company's board of directors joined the vendor's board of directors. The Company has a two-year contract with this vendor valued at $1.4 million and paid $0.7 million during fiscal 2024.74ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A. CONTROLS AND PROCEDURESChanges in Internal Control Over Financial ReportingThere have not been any changes in the Company's internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Conclusion Regarding the Effectiveness of Disclosure Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2024, our disclosure controls and procedures were effective.Management's Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on criteria established in the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on our assessment, management has concluded that its internal control over financial reporting was effective as of March 31, 2024.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Moss Adams LLP, an independent registered public accounting firm, has audited and reported on the consolidated financial statements of 8x8 and on the effectiveness of our internal control over financial reporting. The report of Moss Adams LLP is contained in Item 8 of this Annual Report on Form 10-K.ITEM 9B. OTHER INFORMATIONNone of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the three months ended March 31, 2024 except as described below:Sam Wilson, Chief Executive Officer, adopted a Rule 10b5-1 Trading Plan on March 14, 2024 that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. Mr. Wilson's Rule 10b5-1 Trading Plan provides for the potential sale of up to 29,000 shares of the Company's common stock between June 13, 2024 and June 14, 2025.ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONSNone.75PART IIICertain information required by Part III is omitted from this Annual Report on Form 10-K. The Registrant will file its definitive Proxy Statement for its Annual Meeting of Stockholders pursuant to Regulation 14A of the Exchange Act, not later than 120 days after the end of the fiscal year covered by this Annual Report, and certain information included in the 2024 Proxy Statement is incorporated herein by reference.ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEInformation regarding our directors and corporate governance will be presented in our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be held on or about August 15, 2024, which information is incorporated into this Annual Report by reference. However, certain information regarding current executive officers found under the heading "Information About Our Executive Officers" in Item 1 of Part I hereof is also incorporated by reference in response to this Item 10.We have adopted a Code of Conduct and Ethics that applies to our principal executive officer, principal financial officer, and all other employees at 8x8, Inc. This Code of Conduct and Ethics is posted in the corporate governance section of our website at http://investors.8x8.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of Conduct and Ethics by posting such information in the corporate governance section on our website at http://investors.8x8.com.ITEM 11. EXECUTIVE COMPENSATIONInformation relating to executive compensation will be presented in our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be held on or about August 15, 2024, which information is incorporated into this Annual Report by reference.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSInformation relating to securities authorized for issuance under equity compensation plans and other information required to be provided in response to this item will be presented in our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be held on or about August 15, 2024, which information is incorporated into this Annual Report by reference. In addition, descriptions of our equity compensation plans are set forth in Note 9, Stock-Based Compensation and Stockholders' Equity, in the Notes to Consolidated Financial Statements included in this Annual Report.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCEInformation required to be provided in response to this item will be presented in our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be held on or about August 15, 2024, which information is incorporated into this Annual Report by reference.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESInformation required to be provided in response to this item will be presented in our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be held on or about August 15, 2024, which information is incorporated into this Annual Report by reference.76PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a) Financial Statement and SchedulesThe financial statements are set forth under Part II, Item 8 of this Form 10-K, as indexed below. Financial statement schedules have been omitted since they either are not required, not applicable, or the information is otherwise included.Index to Financial StatementsPageReport of Independent Registered Public Accounting Firm45Consolidated Balance Sheets46Consolidated Statements of Operations47Consolidated Statements of Comprehensive Loss48Consolidated Statements of Stockholders' Equity49Consolidated Statements of Cash Flows50Notes to Consolidated Financial Statements5277(b) Exhibits. The following exhibits are included herein or incorporated herein by reference.Incorporated by ReferenceExhibit NumberExhibit DescriptionCompany FormFiling DateExhibit NumberFiled Herewith2.1Agreement and Plan of Merger, dated as of November 30, 2021, by and among 8x8, Inc., Eagle Merger Sub, LLC, Fuze, Inc. and Shareholder Representative Services LLC, as the Seller Agent+8-K12/1/20212.13.1Restated Certificate of Incorporation of Registrant, dated August 22, 201210-K5/28/20133.13.2Certificate of Amendment to the Restated Certificate of Incorporation of Registrant, dated as of July 12, 2022.8-K7/13/20223.13.3Amended and Restated By-Laws of 8x8, Inc.8-K7/28/20153.24.1Description of Capital StockX4.2Indenture, dated as of February 19, 2019, between 8x8, Inc. and Wilmington Trust, National Association, as trustee (including form of Note)8-K2/19/20194.14.3Indenture, dated as of August 11, 2022, by and between 8x8 Inc. and Wilmington Trust, National Association, as trustee.8-K8/16/20224.14.4Form of 4.00% Convertible Senior Notes due 2028 (included in Exhibit 4.1)8-K8/16/20224.210.1Form of Indemnification Agreement for Directors and Certain Officers*10-Q7/31/201510.310.2Amended and Restated 2017 Executive Change-In-Control and Severance Policy*10-Q8/5/202110.110.38x8, Inc. 2022 Equity Incentive Plan*S-87/15/202210.110.4Form of Stock Option Agreement under the 8x8, Inc. 2022 Equity Incentive Plan*S-87/15/202210.210.5Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the 8x8, Inc. 2022 Equity Incentive Plan*S-87/15/202210.310.68x8, Inc. Amended and Restated 2012 Equity Incentive Plan, effective July 27, 2020*10-Q10/29/202010.110.7Form of Stock Option Agreement under the 8x8, Inc. Amended and Restated 2012 Equity Incentive Plan*S-88/28/201210.2010.8Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the 8x8, Inc. Amended and Restated 2012 Equity Incentive Plan*10-Q10/29/202010.510.98x8, Inc. Amended and Restated 1996 Employee Stock Purchase Plan, approved by stockholders on July 12, 2022*S-87/15/202210.410.108x8, Inc. Amended and Restated 2017 New Employee Inducement Incentive Plan*S-82/2/202410.110.11Form of Stock Option Agreement under the 8x8, Inc. Amended and Restated 2017 New Employee Inducement Incentive Plan*S-811/2/201710.2410.12Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the 8x8, Inc. Amended and Restated 2017 New Employee Inducement Incentive Plan*S-811/2/201710.2510.138x8, Inc. 2006 Stock Plan, as amended*10-K5/26/200910.710.14Form of Stock Option under the 8x8, Inc. 2006 Stock Plan, as amended*10-Q2/7/200710.110.158x8, Inc. Amended and Restated 2013 New Employee Inducement Incentive Plan*10-Q10/29/202010.3078Incorporated by ReferenceExhibit NumberExhibit DescriptionCompany FormFiling DateExhibit NumberFiled Herewith10.16Form of Stock Option Agreement under the 8x8, Inc. Amended and Restated 2013 New Employee Inducement Incentive Plan*S-89/10/201310.2410.17Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the 8x8, Inc. Amended and Restated 2013 New Employee Inducement Incentive Plan*S-89/10/201310.2510.18CEO Promotion Letter, dated May 26, 2023, between 8x8, Inc. and Samuel Wilson*8-K05/31/202310.110.19CFO Promotion Letter, dated June 5, 2023, between 8x8, Inc. and Kevin Kraus*8-K06/06/202310.110.20Promotion Letter, dated December 8, 2022, between 8x8, Inc. and Laurence Denny*10-K05/25/202310.2010.21Employment Agreement, dated April 6, 2022, between 8x8, Inc. and Suzy Seandel*10-K05/25/202310.2110.228x8, Inc. 2022 Equity Incentive Plan*S-87/15/202210.110.23Form of Stock Option Agreement under the 8x8 Inc. 2022 Equity Incentive Plan*S-87/15/202210.210.24Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the 8x8, Inc. 2022 Equity Incentive Plan*S-87/15/202210.310.25Form of Exchange Agreement for the 4.00% Convertible Senior Notes due 20288-K8/4/202210.110.26Term Loan Credit Agreement, dated as of August 3, 2022, by and among 8x8, Inc., Wilmington Savings Fund Society, FSB8-K8/4/202210.210.27First Amendment to Term Loan Credit Agreement, dated May 9, 2023, by and among 8x8, Inc. Wilmington Savings Fund Society, FSB, as administrative agent, and the lenders party hereto10-Q2/1/202410.110.28Form of Warrants to Purchase Common Stock8-K8/4/202210.310.29Services Letter between Eric Salzman and 8x8, Inc.*X21.1Subsidiaries of 8x8, Inc.X23.1Consent of Independent Registered Public Accounting FirmX24.1Power of Attorney (included in signature page)X31.1Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14X31.2Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14X32.1Certification of Chief Executive Officer of the Registrant pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X32.2Certification of Chief Financial Officer of the Registrant pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X978x8, Inc. Clawback Policy, effective October 24, 2023*X79Incorporated by ReferenceExhibit NumberExhibit DescriptionCompany FormFiling DateExhibit NumberFiled Herewith101The following financial statements from the Company's Annual Report on Form 10-K for the year ended March 31, 2024, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags XBRL Instance DocumentX104The cover page from the Company's Annual Report on Form 10-K for the year ended March 31, 2024, formatted in Inline XBRLX+    Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission on request.*    Indicates management contract or compensatory plan or arrangement.ITEM 16. FORM 10-K SUMMARYNone.80SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, 8x8, Inc., a Delaware corporation, has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Campbell, State of California, on May 21, 2024. 8X8, INC. By: /s/ Samuel WilsonSamuel WilsonChief Executive OfficerPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints David Sipes and Samuel Wilson and, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the date indicated: SignatureTitleDate/s/ Samuel WilsonSamuel WilsonChief Executive Officer and Director(Principal Executive Officer)May 21, 2024/s/ Kevin KrausKevin KrausChief Financial Officer(Principal Financial Officer)May 21, 2024/s/ Suzy SeandelSuzy SeandelChief Accounting Officer(Principal Accounting Officer and Duly Authorized Officer)May 21, 2024/s/ Jaswinder Pal SinghJaswinder Pal SinghChairman and DirectorMay 21, 2024/s/ Monique BonnerMonique BonnerDirector May 21, 2024/s/Todd FordTodd FordDirectorMay 21, 2024/s/Alison GleesonAlison GleesonDirectorMay 21, 2024/s/ Elizabeth TheophilleElizabeth TheophilleDirectorMay 21, 202481
